Making Tax Digital for Income Tax: What's Actually Live From 2026

Making Tax Digital for Income Tax (MTD for IT, sometimes written MTD ITSA) is no longer a future reform — it is now live. From April 2026, self-employed individuals and landlords with qualifying income over £50,000 are required to keep digital records and submit quarterly updates to HMRC, and a second wave brings in those earning over £30,000 shortly after. For accountants and bookkeepers, this is one of the biggest operational shifts in how self-assessment clients are served in years.

Who is in scope, and when

MTD for Income Tax applies to sole traders and landlords based on qualifying income — turnover from self-employment and property income combined, before expenses. HMRC has phased the rollout by income threshold:

• From April 2026 — individuals with qualifying income over £50,000.
• A later phase — individuals with qualifying income over £30,000.
• Further threshold reductions have been signalled for future years, following the same pattern used for MTD for VAT, which started with the largest businesses and was progressively extended to smaller ones.

Qualifying income is based on the client's total self-employment and property turnover as reported in their most recent self-assessment return — so accountants need to check existing client data now, not wait for HMRC to notify anyone individually.

What actually changes for clients

Instead of a single annual self-assessment return, clients in scope must:

• Keep digital records of income and expenses using MTD-compatible software (or spreadsheets linked via bridging software).
• Submit a quarterly summary update to HMRC for each income source, broadly cumulative and broadly automated once records are kept digitally.
• Submit a year-end final declaration that brings everything together, replacing the old self-assessment return format for those sources.

The quarterly updates are not mini tax returns requiring full manual review each time — the intent is that, once records are kept digitally throughout the year, the quarterly submission is close to automatic. The practical burden shifts from "one big annual push" to "clean, continuous digital records," which is exactly where the compliance risk sits for practices that haven't yet moved clients off spreadsheets and shoeboxes.

What this means for practices right now

• Segment your client base by qualifying income to see who is in the first wave, who follows later, and who is comfortably under all current thresholds — for now.
• Audit record-keeping readiness. Clients still working from paper records or unstructured spreadsheets need the most lead time to move to compliant software.
• Decide your software stance. Whether the practice standardises on one MTD-compatible package across clients, or supports several, has real implications for training, support load and pricing.
• Price the change properly. Quarterly submissions are a different (and ongoing) service to an annual return — many practices are re-pricing affected clients onto a quarterly or monthly fee structure rather than trying to absorb the extra workload into an unchanged annual fee.
• Communicate early. Clients who don't yet realise this applies to them are the highest-risk group for missed deadlines once quarterly submissions begin.

Common misconceptions worth correcting with clients

"It only applies to big businesses." No — thresholds are based on gross income, not profit, and £50,000 in turnover is a modest self-employment or rental income, not a large business.

"I can keep using my current spreadsheet." Only if it connects to HMRC via bridging software that meets MTD requirements — an unconnected spreadsheet on its own does not satisfy the digital record-keeping rule.

"Quarterly updates mean quarterly tax bills." Not directly — payments on account continue broadly as before; the change is to reporting frequency and format, not to when tax is actually due, though accountants should always confirm current payment rules with clients rather than assume.

The bottom line

MTD for Income Tax has moved from "something to plan for" to "something happening now." Practices that treat the first-wave April 2026 threshold as the moment to start client conversations are already behind — the software migration and record-keeping clean-up needs a lead time that quarterly deadlines don't leave room for once they arrive. Getting ahead of client segmentation and software choice now is the difference between a smooth first set of quarterly submissions and a scramble.

What happens if a client misses a quarterly deadline

HMRC has moved to a points-based penalty system for MTD submissions, similar to the one already used for VAT: a missed submission earns a penalty point rather than an automatic fine, and only after a client accumulates enough points within a rolling period does a financial penalty apply. This is more forgiving of an occasional slip than the old flat-penalty approach, but it also means a practice with several clients missing quarterly deadlines regularly can watch points accumulate quietly across a client bank without any single missed deadline feeling urgent enough to fix the underlying process problem — which makes tracking submission compliance across the whole client list, not just reacting to individual misses, the more useful habit to build.

A realistic first-wave scenario

Take a landlord with two rental properties and a small consultancy sole trade, combined turnover comfortably over the £50,000 threshold, currently keeping records in a spreadsheet and handing everything to their accountant once a year. Under MTD, that client needs compatible software (or a bridging tool connecting their spreadsheet to HMRC), quarterly submissions for each income source, and a shift from "annual data dump" to "clean records maintained continuously." For a practice with dozens of similar clients, the software and process migration is the actual project — the quarterly filing itself becomes close to mechanical once records are kept properly through the year, which is exactly why the record-keeping migration deserves to start well before the first quarterly deadline arrives, not alongside it.

Getting clients onto compliant software is the practical bottleneck for most practices — our review of the best bookkeeping software for self-employed clients is a useful starting point for that migration. MTD sits alongside other digital tax reforms accountants are tracking, including the EU's VAT in the Digital Age e-invoicing mandate for any client trading cross-border.