Do I need to sign up for Making Tax Digital?

The 30-second answer

You need to use Making Tax Digital (MTD) for Income Tax if your gross self-employment + property income (before expenses) is over a set amount. It’s being phased in:

• Over £50,000 → you start from 6 April 2026
• Over £30,000 → you start from 6 April 2027
• Over £20,000 → you start from 6 April 2028

If your qualifying income is £20,000 or less, you don’t need to do anything — you carry on with Self Assessment as normal.

That’s the headline. If any of it made you go “hang on — is that turnover or profit?” or “what actually is MTD?” — keep reading, because those two questions catch a lot of people out.

What is Making Tax Digital (MTD)?

If you’ve heard “MTD” thrown around and thought what on earth is that — you’re not alone.

Making Tax Digital for Income Tax is a new way of keeping your records and updating HMRC through the year. The big change is what happens during the tax year — your annual tax return stays. In practice, you’ll:

1. Keep digital records of your income and expenses (using an app or software rather than a shoebox of receipts)
2. Use compatible software that talks to HMRC
3. Send a short summary every three months — a running update on how your income and expenses are going
4. Still complete your tax return after the tax year ends, as you do now

That’s it. MTD doesn’t change how your tax is calculated, and your annual tax return is still due by 31 January as usual. What’s new is that MTD adds updates during the year, each with their own deadline.

Now to the two things that trip people up.

The trap that catches people out: MTD looks at turnover, not profit

This is the single most important thing on this page.

The threshold is based on your gross self-employment and property income before expenses — not your profit. For a sole trader, think turnover before expenses.

Here’s why that matters:

So someone checking the wrong number could believe they’ve got an extra year — and be caught out. When you’re working out whether MTD applies to you, use the top-line figure, before expenses.

What income counts towards the MTD threshold?

Only two things count, added together:

• ✅ Gross self-employment income (your sole-trader turnover, before expenses)
• ✅ Gross property income (your rent, before expenses)

Everything else is left out of the test:

• ❌ PAYE salary from a job
• ❌ Dividends
• ❌ Pensions
• ❌ Savings interest
• ❌ Your share of profit from a partnership

That last one is worth a quick word.

A note on partnerships. If you’re a partner in a business, your share of the partnership’s profit does not count towards your qualifying income, and it doesn’t need quarterly MTD reporting on its own — though it still goes on your annual tax return as normal. Partnerships themselves haven’t been brought into MTD for Income Tax yet, and no start date has been set.

Joint property is not the same as a partnership. If you own a rental property jointly — say, with a spouse or a co-owner — generally, each owner counts their own share of the property income towards their own threshold, and owning a property together doesn’t automatically make it a partnership. (If your property activity really is run as a formal partnership, that’s a different situation — worth a quick chat with an accountant rather than guessing.)

When do I have to start?

MTD is arriving in stages, based on the qualifying income shown on your most recent tax return:

Your gross self-employment + property income	You must start using MTD from
Over £50,000	6 April 2026
Over £30,000	6 April 2027
Over £20,000	6 April 2028

The £50,000 stage is decided by your 2024/25 tax return; the £30,000 stage by your 2025/26 return; and the £20,000 stage by your 2026/27 return.

Not sure which side of the line you’re on? Find your MTD start date with the free Start Sharp checker → — it takes about two minutes.

What will I actually have to do under MTD?

Four things, in plain English:

1. Keep digital records — log your income and expenses as you go, in software or an app.
2. Use compatible software — it sends the information to HMRC for you.
3. Send a quarterly update — four times a year, by 7 August, 7 November, 7 February and 7 May. Each one is a short summary of your income and expenses.
4. Submit your year-end tax return — pulling the year together, due 31 January as usual.

Myth-buster: quarterly updates are NOT four tax returns

This is the fear we hear most: “So I’ve got to do four tax returns a year now?!”

No. The quarterly updates are summaries, not tax returns. Each one is a running total — your income and expenses from the start of the tax year up to the end of that quarter — so the figures build up across the year rather than being four separate filings:

Q1: 6 Apr – 5 Jul → due 7 Aug
Q2: 6 Apr – 5 Oct → due 7 Nov
Q3: 6 Apr – 5 Jan → due 7 Feb
Q4: 6 Apr – 5 Apr → due 7 May

You’re not finalising your tax bill four times, and you’re not paying tax four times. Think of them as checking in, not filing.

For 2026/27, HMRC says there are no penalties for missing a quarterly-update deadline — but you still need to submit the updates before you can submit your tax return.

Do I still submit an annual tax return?

Yes. MTD changes how you report through the year — it doesn’t make the annual tax return disappear.

• The tax return for the year before you join MTD (for example, your 2025/26 Self Assessment if you start MTD on 6 April 2026) is filed the normal way.
• Once you’re in MTD, after each tax year ends you complete your year-end tax return through your MTD software, due by 31 January — the same deadline you already know.

So the year-end tax return is still very much part of the process. The quarterly updates sit alongside it, not instead of it.

Got an HMRC letter — or didn’t get one?

HMRC has been writing to people it believes will be affected, based on the income shown on their latest tax return.

But here’s the important bit: it’s your qualifying income that decides whether MTD applies to you — not whether a letter landed on your doormat.

• Got the letter? You’re very likely in scope. Check your start date and get ready.
• Didn’t get one? Don’t automatically assume you’re out. HMRC may not have written to you yet, or your income may have changed since your last return. It’s worth checking your own figures rather than waiting to be told.

Are there exemptions?

Some people don’t have to use MTD.

• If your qualifying income is £20,000 or less, you’re not in scope — nothing to apply for.
• A few other situations are automatically exempt too — for example, personal representatives handling the tax affairs of someone who has died, or people without a National Insurance number. HMRC’s exemption guidance has the full list.
• You can apply to be “digitally excluded” if it’s genuinely not reasonable for you to use software — because of your age, a health condition or disability, because you can’t get internet access where you live or work, or on religious grounds. HMRC won’t accept reasons like simply preferring paper or finding software unfamiliar.

If you think an exemption might apply to you, it’s worth checking the official GOV.UK exemption guidance or talking it through.

Real-world examples: are these people caught?

A quick way to see yourself in it — number → answer → why:

Priya — sole trader, £55,000 turnover, £25,000 profit
→ Caught, from April 2026. Her turnover (£55,000) is over £50,000. The profit figure doesn’t come into the threshold test.

Tom — landlord, £52,000 rent, big mortgage and repair costs
→ Caught, from April 2026. It’s the £52,000 gross rent that counts, not what’s left after his costs.

Sarah — £50,000 salary from her job + £15,000 from a weekend side hustle
→ Not caught. Her PAYE salary doesn’t count. Only the £15,000 self-employment does — that’s under £20,000, so MTD doesn’t apply.

Dan — £30,000 self-employment + £25,000 rental income
→ Caught, from April 2026. You add the two together: £55,000 combined, over £50,000.

Emma & Jack — jointly own a rental, £40,000 total rent
→ Generally, each owner counts their own share (£20,000 each here), not the full £40,000. On its own that’s not over the threshold — but they’d add it to any other self-employment or property income they each have.

Leo — £14,000 from a small self-employed business
→ Not caught. Under £20,000, nothing to do — carry on with Self Assessment as normal.

What if I’m below the threshold?

Then you’re not in scope right now, and there’s nothing you need to do — you don’t need to tell HMRC, and you carry on with Self Assessment as normal.

It’s still worth keeping an eye on your income, though. If your self-employment and property turnover grows past a threshold, MTD could apply to you in a future year.

In short

• MTD for Income Tax changes how you report, but it doesn’t change how your tax is calculated.
• The threshold is gross self-employment + property income before expenses, not profit — check the right number.
• It counts self-employment + property income, added together — not salary, dividends, pensions or partnership profit.
• Quarterly updates are summaries, not four tax returns — and the annual tax return stays.
• No letter doesn’t mean you’re out.

Not sure where you stand?

Start Sharp helps you go from “am I even affected?” to “right, I know my date and what to do next.”

Find your MTD start date — free, about two minutes →

You’ll get your date, a plain-English explanation of what it means, and the Start Sharp MTD Readiness Toolkit to help you get ready. Prefer to talk it through? You can have a quick chat with Mel, a Chartered Certified Accountant — the real person behind Start Sharp.

FAQs

What is Making Tax Digital (MTD)?

It’s a new way of keeping records and updating HMRC through the year: digital records, compatible software, a short summary every three months, and your usual tax return after the year ends. It changes how you report, but it doesn’t change how your tax is calculated.

Is MTD based on turnover or profit?

It’s based on your gross self-employment and property income before expenses — not profit. A landlord with £52,000 of rent but only £15,000 profit after costs is still caught. (Full explanation above.)

What income counts towards the MTD threshold?

Your gross self-employment income and gross property income, added together. Salary, dividends, pensions, savings interest and partnership profit shares don’t count.

Does my PAYE salary count towards MTD?

No. Only self-employment and property income are in the test. A £50,000 salary plus a £15,000 side hustle means only the £15,000 counts.

Do I still submit an annual tax return under MTD?

Yes. The quarterly updates sit alongside your usual year-end tax return, still due by 31 January.

Are the quarterly updates four separate tax returns?

No — they’re running summaries of your income and expenses, four times a year. You don’t finalise or pay your tax four times.

What if HMRC hasn’t sent me a letter?

Don’t assume you’re out. It’s your qualifying income that decides whether MTD applies, not the letter — HMRC may simply not have written to you yet.

What if my income is below the threshold?

There’s nothing to do and no need to tell HMRC — you carry on with Self Assessment as normal. Just keep an eye on your income for future years.