# Do You Need to Use MTD for Self Assessment from April 2026?

Last updated: 9 October 2026

If you're a sole trader or landlord with a total gross income from self-employment and property exceeding £50,000 in a tax year, you'll need to use MTD for Income Tax starting April 6, 2026. This requires keeping digital records and submitting quarterly updates to HMRC through compatible software, while still filing an annual Self Assessment return.

## Making Tax Digital: The Next Phase

Making Tax Digital (MTD) is a key part of the UK government's plan to modernise the tax system. It aims to make tax administration more efficient, accurate, and easier for taxpayers by requiring businesses and individuals to keep digital records and submit tax information to HMRC using compatible software. The initiative has been rolled out in phases, starting with VAT-registered businesses. Now, MTD is expanding to include Income Tax Self Assessment (ITSA).

The next significant milestone is April 6, 2026, when MTD for Income Tax will become mandatory for sole traders and landlords with a total gross income from self-employment and property exceeding £50,000 in a tax year. This represents a major shift in how these individuals manage their tax obligations, requiring them to adopt digital tools and processes. This guide provides a comprehensive overview of the new rules, requirements, and how you can prepare for MTD for Income Tax.

This change is one of the most significant updates to Self Assessment since 1997, and it's crucial to understand how it affects you. With only a small percentage of those affected having signed up so far, it's more important than ever to get informed and prepared.

## Who Needs to Use MTD for Self Assessment from April 2026?

The initial phase of MTD for Income Tax focuses on sole traders and landlords with a total gross income from self-employment and property exceeding £50,000 in a tax year. It's important to note that this is based on **gross income**, not profit.

### Understanding the Income Threshold

The £50,000 threshold is based on your total gross income from all self-employment and property sources. This means you need to add up all your income from these sources before deducting any expenses or allowances.

### Income Threshold Timeline

The income threshold for MTD for Income Tax is set to decrease over the next few years. Here's a breakdown of the timeline:

| Date | Income Threshold | Requirement |
| --- | --- | --- |
| April 6, 2026 | £50,000+ | MTD for Income Tax |
| April 6, 2027 | £30,000+ | MTD for Income Tax |
| April 6, 2028 | £20,000+ | MTD for Income Tax |

### What if My Income Fluctuates?

If your income fluctuates and exceeds the £50,000 threshold in one year but falls below it in another, you'll only need to comply with MTD for the years your income is above the threshold.

### Example Scenarios

Let's look at some examples to illustrate who needs to comply with MTD for Income Tax from April 2026:

1. **Scenario 1:** Sarah is a sole trader with a gross income of £60,000 from her business in the 2024/25 tax year. She will need to comply with MTD for Income Tax from April 6, 2026.
2. **Scenario 2:** John is a landlord with a gross rental income of £40,000 in the 2024/25 tax year. He does not need to comply with MTD for Income Tax from April 6, 2026.
3. **Scenario 3:** Emily is both a sole trader and a landlord. Her gross income from her business is £30,000, and her gross rental income is £25,000, totaling £55,000. She will need to comply with MTD for Income Tax from April 6, 2026, as her total gross income exceeds £50,000.
4. **Scenario 4:** David's income was £40,000 in 2024/25, £60,000 in 2025/26 and back down to £35,000 in 2026/27. He will need to comply with MTD from April 6, 2026, but if his income stays below the threshold, he will not need to comply in later years.

## What are the Requirements of MTD for Income Tax?

Complying with MTD for Income Tax involves several key requirements:

### Key Requirements

- Maintain digital records of income and expenses
- Use MTD-compatible software
- Submit quarterly updates to HMRC
- File an annual Self Assessment return

### Maintaining Digital Records

You need to keep digital records of all your business income and expenses. This includes:

- Sales and income
- Expenses
- Receipts
- Bank statements
- Other relevant financial documents

These records must be maintained in a digital format, such as a spreadsheet or accounting software.

### Using MTD-Compatible Software

You need to use MTD-compatible software that can keep digital records and submit quarterly updates to HMRC. There are many software options available, including cloud-based accounting software and bridging software that connects existing spreadsheets to HMRC's systems.

### Submitting Quarterly Updates

You need to submit quarterly updates to HMRC through your MTD-compatible software. The software will automatically generate the required reports based on your digital records and submit them to HMRC electronically.

### Filing an Annual Self Assessment Return

Even with MTD, you will still need to file an annual Self Assessment return. The quarterly updates provide HMRC with regular information about your income and expenses, but the annual return is still required to finalise your tax liability for the year.

## How to Prepare for MTD for Income Tax

Preparing for MTD for Income Tax involves several steps:

1. **Assess your income:** Determine if your total gross income from self-employment and property exceeds the £50,000 threshold.
2. **Choose MTD-compatible software:** Research and select software that meets your needs and is compatible with MTD requirements. AccountsOS is an excellent option.
3. **Digitise your records:** Start keeping digital records of all your business income and expenses.
4. **Familiarise yourself with the submission process:** Learn how to submit quarterly updates to HMRC through your chosen software.
5. **Seek professional advice:** If needed, consult with an accountant or tax advisor to ensure you are fully compliant with MTD requirements.

## Penalties for Non-Compliance

HMRC may charge penalties for non-compliance with MTD. Penalties can be applied for failing to keep digital records, not submitting quarterly updates on time, or making errors in your submissions.

### Penalty Examples

| Scenario | Penalty |
| --- | --- |
| Late quarterly update (Year 1) | No penalty |
| Late quarterly update (Year 2+) | Fixed points-based system |
| Failure to keep digital records | Case-by-case penalties |

However, in the first year, HMRC is offering no penalties for late quarterly updates, providing a grace period for businesses to adapt to the new requirements.

## How AccountsOS Can Help

AccountsOS is built to help sole traders and landlords prepare for MTD. VAT MTD is live today, and AccountsOS is [on HMRC's list of MTD VAT software](https://www.tax.service.gov.uk/making-tax-digital-software); MTD for Income Tax support is in development ahead of April 2026. Features include:

- **Digital record keeping:** Keep all your income and expense records in one place.
- **MTD for VAT, live now:** Submit VAT returns directly to HMRC today.
- **MTD for Income Tax, in development:** Quarterly updates and ITSA submissions being built ahead of April 2026.
- **User-friendly interface:** Our software is easy to use, even if you're not an accounting expert.
- **Expert support:** Get help from our team of experts whenever you need it.

## Worked Examples

To further illustrate the impact of MTD, let's consider a few worked examples:

### Example 1: Simple Self-Employment Income

**Scenario:** John is a freelance graphic designer. In the 2024/25 tax year, his total income from freelance work is £55,000.

**MTD Requirement:** Since John's income exceeds £50,000, he must comply with MTD for Income Tax from April 6, 2026.

**Compliance Steps:**

1. John needs to use MTD-compatible software to record all his income and expenses digitally.
2. He must submit quarterly updates to HMRC, detailing his income and expenses for each quarter.
3. John will still need to file an annual Self Assessment return to finalise his tax liability.

### Example 2: Landlord with Property Income

**Scenario:** Sarah owns a rental property. In the 2024/25 tax year, her gross rental income is £60,000.

**MTD Requirement:** As Sarah's gross rental income exceeds £50,000, she needs to comply with MTD for Income Tax from April 6, 2026.

**Compliance Steps:**

1. Sarah needs to use MTD-compatible software to record all her rental income and expenses digitally.
2. She must submit quarterly updates to HMRC, detailing her rental income and expenses for each quarter.
3. Sarah will still need to file an annual Self Assessment return to finalise her tax liability.

### Example 3: Mixed Income Streams

**Scenario:** Emily is both a sole trader and a landlord. In the 2024/25 tax year, her gross income from her business is £30,000, and her gross rental income is £25,000.

**MTD Requirement:** Since Emily's total gross income (£30,000 + £25,000 = £55,000) exceeds £50,000, she will need to comply with MTD for Income Tax from April 6, 2026.

**Compliance Steps:**

1. Emily needs to use MTD-compatible software to record all her business income, business expenses, rental income, and rental expenses digitally.
2. She must submit quarterly updates to HMRC, detailing her combined income and expenses for each quarter.
3. Emily will still need to file an annual Self Assessment return to finalise her tax liability.

### Example 4: Income Below Threshold

**Scenario:** David is a sole trader. In the 2024/25 tax year, his total income from his business is £45,000.

**MTD Requirement:** As David's income is below £50,000, he does not need to comply with MTD for Income Tax from April 6, 2026. He can continue to file his Self Assessment return as before, unless his income exceeds the threshold in a later year.

## Frequently asked questions

### What is Making Tax Digital (MTD)?

Making Tax Digital (MTD) is a government initiative requiring businesses and individuals to maintain digital records and submit tax information to HMRC using compatible software. The goal is to make tax administration more efficient, accurate, and easier for taxpayers.

### Who needs to use MTD for Income Tax from April 2026?

From April 6, 2026, sole traders and landlords with a total gross income from self-employment and property exceeding £50,000 in a tax year must use MTD for Income Tax. This means keeping digital records and sending quarterly updates to HMRC.

### What if my income is below the £50,000 threshold in 2026, but exceeds it later?

If your income exceeds the threshold in a later tax year, you will need to comply with MTD for Income Tax from the start of the following tax year. For example, if your income exceeds £50,000 in the 2027/28 tax year, you'll need to comply from April 6, 2028.

### What records do I need to keep digitally for MTD?

You need to keep digital records of all your business income and expenses. This includes sales, purchases, receipts, bank statements, and any other relevant financial documents. The records must be maintained in a digital format, such as a spreadsheet or accounting software.

### What is considered 'qualifying income' for MTD?

Qualifying income includes all income from self-employment and property. This includes turnover, rent received, and any other income related to your business activities. It's the gross income before any expenses or deductions are applied.

### What software can I use for MTD?

You need to use MTD-compatible software that can keep digital records and submit quarterly updates to HMRC. There are many software options available, including cloud-based accounting software and bridging software that connects existing spreadsheets to HMRC's systems. AccountsOS is designed to be fully MTD compliant.

### How do I submit quarterly updates to HMRC?

You submit quarterly updates to HMRC through your MTD-compatible software. The software will automatically generate the required reports based on your digital records and submit them to HMRC electronically. You'll need to authorise the software to interact with HMRC's systems.

### What happens if I don't comply with MTD?

HMRC may charge penalties for non-compliance with MTD. Penalties can be applied for failing to keep digital records, not submitting quarterly updates on time, or making errors in your submissions. However, in the first year, HMRC is offering no penalties for late quarterly updates.

### Will I still need to file an annual Self Assessment return?

Yes, even with MTD, you will still need to file an annual Self Assessment return. The quarterly updates provide HMRC with regular information about your income and expenses, but the annual return is still required to finalise your tax liability for the year.

### What happens if I have multiple income streams?

If you have multiple income streams, such as self-employment income and rental income, you need to include all qualifying income when determining if you meet the MTD threshold. If the total income exceeds the threshold, you must comply with MTD for all income streams.

### Are there any exemptions from MTD?

In limited circumstances, HMRC may grant exemptions from MTD. These exemptions are typically reserved for individuals who cannot use digital tools due to age, disability, or location. You need to apply to HMRC for an exemption if you believe you qualify.

### What support is available to help me comply with MTD?

HMRC provides guidance and support to help businesses and individuals comply with MTD. You can find information on the HMRC website, attend webinars, and contact HMRC's helpline for assistance. Additionally, software providers like AccountsOS offer support and resources to help you use their products effectively.

## Related guides

- [Self Assessment Guide](/filing/self-assessment)
- [Tax Deadlines](/deadlines)
- [AccountsOS Features](/features)