If you’re self-employed or earn rental income in the UK, a significant change is coming your way on 6 April 2026. It’s called Making Tax Digital for Income Tax (MTD IT), and it will fundamentally change how you report your earnings to HMRC.
Whether you’re a construction worker, delivery driver, cleaner, consultant, or landlord, this new legislation will affect how you manage your tax obligations. Here’s everything you need to know to prepare.
What is Making Tax Digital for Income Tax?
Making Tax Digital for Income Tax is the government’s initiative to modernise the UK tax system and reduce tax fraud and avoidance. The goal is simple: move away from paper records and annual tax returns, and shift towards digital record-keeping and regular online reporting.
Currently, if you’re self-employed or a landlord, you can file your Self Assessment tax return directly on the HMRC website once a year. From April 2026, that will no longer be an option if your income exceeds certain thresholds. Instead, you’ll need to use approved accounting software—such as QuickBooks, Xero, or similar platforms—to keep digital records and submit updates to HMRC throughout the year.
Who will be affected and when?
MTD IT will be rolled out in phases based on your qualifying income—that’s your gross income (before expenses) from self-employment and property rental combined.
Here’s the timeline:
- From 6 April 2026: Self-employed individuals and landlords with qualifying income over £50,000
- From 6 April 2027: Those with qualifying income over £30,000
- From 6 April 2028: Those with qualifying income over £20,000
Important: HMRC will look at your previous tax return to determine if you need to join MTD. For example, they’ll check your 2024/25 tax return (due by 31 January 2026) to see if you must join MTD for the 2026/27 tax year.
If you have multiple income sources—say you’re a self-employed electrician who also rents out a property—you’ll need to add up all your qualifying income to see if you’re above the threshold.
What will you need to do?
Once you’re within the MTD IT system, your tax reporting will look very different. Here’s what’s required:
1. Keep digital records
You’ll need to maintain digital records of all your income and expenses. This means no more shoeboxes full of receipts or handwritten notebooks. Everything must be recorded electronically using MTD-compatible software.
2. Submit quarterly updates
Every three months, you’ll need to send HMRC a summary of your income and expenses. These updates are cumulative, meaning each report includes your totals for the tax year so far.
The deadlines are the 7th of the month following the end of each quarter. For example, for the quarter ending 5 July 2026, you’d need to submit by 7 August 2026.
3. File a final declaration
At the end of the tax year, you’ll still need to submit a final declaration (similar to your current tax return) by 31 January. This is where you’ll include any other income sources, claim allowances and reliefs, and make final adjustments.
4. Use approved software
You must use software that’s compatible with MTD IT. HMRC provides a list of approved products, and you should choose one that suits your needs and budget. Some software can handle both quarterly updates and your final declaration, while others may only do one or the other—so check before you buy.
What about spreadsheets?
If you currently use spreadsheets to track your income and expenses, you can continue to do so. However, you’ll need to connect them to HMRC using “bridging software” that’s MTD-compatible. Unlike with MTD for VAT, free versions of this bridging software may not be widely available, so factor this into your planning.
Why is this happening?
The government’s primary aim is to reduce tax fraud and tax avoidance by making income more visible in real-time. Digital reporting also helps HMRC identify discrepancies earlier and provides you with a clearer picture of your tax position throughout the year—no more surprises in January.
For many self-employed workers and landlords, this shift will require adjusting to new routines and possibly new costs for software. But it’s also an opportunity to get better organised and stay on top of your finances year-round.
Common concerns answered
Will I have to pay tax quarterly?
No. The quarterly updates are just reports of your income and expenses. You’ll still pay your tax in the usual way: payments on account in January and July, plus a balancing payment (if needed) the following January.
What if I miss a quarterly deadline?
Missing a deadline can result in penalties from HMRC, so it’s crucial to stay on top of your submissions. Setting reminders or working with an accountant can help you avoid this.
What if my income fluctuates and I drop below the threshold?
Once you’re in the MTD IT system, you’ll generally need to continue submitting quarterly updates even if your income drops below the threshold in future years. Check with HMRC or your accountant if your circumstances change.
Do I need to sign up now?
If your qualifying income is over £50,000, you’ll need to be ready by April 2026. HMRC is currently running a voluntary pilot scheme, so you can sign up early to test the system and get comfortable with the new process before it becomes mandatory.
How Lexarox Accounts can help with Making Tax Digital
At Lexarox Accounts, we’ve been filing taxes digitally for over 12 years as HMRC-authorised agents. We understand that navigating MTD IT can feel overwhelming, especially if you’re used to doing things a certain way.
We can help you:
- Choose the right MTD-compatible software for your needs
- Set up your digital records and train you on how to use the system
- Submit your quarterly updates and final declarations on your behalf
- Ensure you stay compliant and avoid penalties
Whether you’re a contractor, delivery driver, landlord, or run your own trade, we’re here to make this transition as smooth and stress-free as possible.
Ready to get prepared for Making Tax Digital? Contact us today to learn more about how we can support you through this change. Let us handle the numbers so you can focus on what you do best.
Lexarox Accounts – Your trusted partner for digital tax compliance.
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