Making Tax Digital for Income Tax

The three start dates

Making Tax Digital for Income Tax (MTD) is coming in three stages. Whether you are in depends on your qualifying income in an earlier tax year.

So the return you are filing now, for 2025/26, is the one HMRC will look at to decide whether you start in April 2027. If your qualifying income on it is over £30,000, HMRC expects you to be using MTD from 6 April 2027.

Qualifying income is turnover, not profit

This is the part most people get wrong. GOV.UK defines qualifying income as "your total income from self-employment and property. This is the amount before expenses (also known as turnover)".

• It is your takings before expenses, not your profit.
• Self-employment and property income are added together.
• Wages from a job, a share of partnership profit, dividends and pensions do not count.

Profit is £22,000, but qualifying income is £34,000. That is over £30,000, so this plumber starts MTD from 6 April 2027.

GOV.UK's own example adds two sources: £25,000 of rental income plus £27,000 of self-employment income gives qualifying income of £52,000.

What changes when you join

Digital records

You keep your business income and expenses in software that works with MTD, and send updates from it. You choose and authorise the software yourself, or your agent does it for you.

Quarterly updates

Four times a year you send a summary of income and expenses to HMRC. Each update is cumulative, so it covers from the start of the tax year to the end of that quarter.

If your accounting period runs 1 April to 31 March, you can use calendar update periods instead (1 April to 30 June, and so on). The deadlines are the same.

For someone starting on 6 April 2027, the first update covers 6 April to 5 July 2027 and is due by 7 August 2027.

Your tax return

You still send a tax return for the year, but through your software. You need to send your quarterly updates first. You also still need to send a normal Self Assessment return for the year before you start using MTD.

Penalties under MTD

MTD comes with a new points-based penalty system, which replaces the old one from the year you join.

• For 2026/27, HMRC will not give penalty points for late quarterly updates. Penalty points still apply to late tax returns.
• After 2026/27, each missed quarterly update deadline earns a point. At 4 points you get a £200 penalty.
• Late payment penalties for 2026/27 are 3% of the tax owed at day 15 and another 3% at day 30, then 10% a year on the amount still owed from day 31. In your first year of the new penalties you get 30 days, not 15, to pay or set up a payment plan before penalties start. For 2027/28 the 3% figures become 4%.

Your 2025/26 return still uses the older penalties, explained in our deadlines guide.

Exemptions and opting out

Some people are exempt, for example if they are digitally excluded. If you are exempt, you still send a normal Self Assessment return. Once you are in MTD, if your qualifying income drops below the threshold for 3 tax years in a row, you can choose to opt out. HMRC has a tool on GOV.UK to check whether and when you need to start.

Will HMRC tell me?

HMRC reviews your return each year. If your qualifying income is over the threshold, it writes to tell you to start by the next tax year. GOV.UK is clear that "it is still your responsibility to check" even if no letter arrives.

Where Sole Sums fits

Sole Sums is not MTD software. It does not send quarterly updates or file returns. What it does do is help you keep a clean income and expense log in HMRC-style categories and see your estimated bill as you go. That makes the switch easier, because you already know your turnover, your expenses and roughly what you owe.

If your 2025/26 turnover is close to £30,000, it is worth knowing now. Add up your takings for 6 April 2025 to 5 April 2026 before you file.