Making Tax Digital for Income Tax alters how you’ll interact with HMRC as a self-employed individual or landlord. Rather than compiling records once a year for Self-Assessment, you’ll maintain digital records throughout the year and submit quarterly updates using approved software. You will then finalise your tax position by submitting your final declaration on the same day as the Self-Assessment return. This will provide HMRC with regular business insights while giving you clearer financial visibility throughout the year.
This transformation applies to sole traders, freelancers, consultants, and property landlords whose combined income from these sources exceeds specific thresholds. From April 2026, if you earn over £50,000 annually from self-employment or rental property, you must comply, with the threshold reducing to £30,000 from April 2027 and £20,000 from April 2028.
How You’ll Report Income Under Making Tax Digital for Income Tax (MTD)?
Under MTD for Income Tax—also known as Making Tax Digital for Income Tax, the new system will operate through four quarterly submissions that you’ll make covering cumulative year-to-date figures. Your compatible software will connect directly to HMRC, automatically formatting and transmitting data according to regulatory requirements.
Digital record-keeping will capture every transaction with proper categorisation as it occurs. You’ll classify rental income by property source, while allocating business earnings to appropriate categories. The software will build a comprehensive financial picture continuously rather than requiring you to reconstruct everything at year-end.
Key Benefits for MTD for Income Taxpayers
How Making Tax Digital for Income Tax Works in Practice ?
Consider how Sarah will implement MTD with her three-property portfolio and marketing consultancy. Each morning, her software will automatically import overnight rental payments, categorising them by property source. When she pays for boiler repairs at Property A, she’ll photograph the invoice on her phone, which links directly to that property’s maintenance account.
Her marketing consultancy income flows through a separate business stream in the same software. Client payments import automatically from her business account, while expenses like travel and professional subscriptions get categorised as they occur. The software maintains separate profit calculations for each revenue source.
By the quarterly deadline, Sarah’s year-to-date figures will be ready with a button click. Under MTD for Income Tax, the system calculates her tax position across both income streams, showing she owes £3,200 so far this year. She can set aside funds monthly rather than facing a surprise bill. Her quarterly submission takes thirty minutes instead of the weekend sessions she previously spent reconstructing records from bank statements.
How to Get Started Before MTD for Income Tax Begins ?
Calculate your combined self-employment and rental income to determine when your MTD for Income Tax obligations will begin. Include all sources before expenses, remembering that joint property ownership will split income proportionally.
How to Prepare for Success with Making Tax Digital for Income Tax?
Making Tax Digital will transform your annual compliance into ongoing business management, providing you with better financial control and cash flow visibility while meeting regulatory requirements.
Your early preparation will prevent complications and ensure you have tested systems before your Making Tax Digital for Income Tax obligations begin. Digital adoption will position your business for both compliance success and improved financial insights in an increasingly connected environment.