Making Tax Digital for Income Tax: 2026 Guide

Making Tax Digital for Income Tax (MTD) is the biggest change to personal tax since Self Assessment began. It went live on 6 April 2026 for sole traders and landlords with qualifying income over £50,000, and the next group is already locked in: if your qualifying income on your 2025/26 tax return is over £30,000, you must start on 6 April 2027. From April 2028 the threshold falls again, to £20,000.

The rules are the same for everyone, but how they land is very different for a consultant with private practice, a YouTuber paid in dollars and free products, an employee with a buy to let flat, or someone actively trading crypto. This guide explains what MTD is, who it catches, what counts towards the threshold, and exactly what each of those groups should do now.

 Key takeaways

• MTD replaces the annual tax return with digital records, four quarterly updates and a final declaration, all sent through HMRC recognised software.
• The test is gross income, not profit: your combined self employment turnover and property income before expenses.
• Salary, RSUs, pensions, dividends, interest and capital gains do not count towards the threshold, but they still go on your final declaration.
• Your 2025/26 figures decide whether you join in April 2027. That return is due by 31 January 2027, so now is the time to check.
• Once you are in, you normally stay in until your qualifying income is below the threshold for three tax years in a row.

 What is Making Tax Digital for Income Tax?

Under the old system you kept records however you liked and filed one tax return a year. Under MTD you must:

1. Keep digital records of your business and property income and expenses, using compatible software or a spreadsheet linked to bridging software.
2. Send a quarterly update to HMRC for each self employment and each property business, four times a year.
3. Submit a final declaration by 31 January after the tax year ends. This replaces the Self Assessment tax return and is where everything else goes: salary, dividends, interest, capital gains, pension contributions, Gift Aid and reliefs.

Two points cause a lot of confusion. First, MTD does not change when you pay tax: balancing payments and payments on account are still due on 31 January and 31 July. The quarterly updates show HMRC an estimate, not a bill. Second, if you are in MTD you cannot file through HMRC’s own online return; the final declaration has to go through software.

 When do you need to join?

HMRC looks back at the tax return filed just before each tax year starts. If your qualifying income on that return is over the threshold, you are in from the following 6 April.

• Over £50,000 on your 2024/25 return: MTD from 6 April 2026 (already live)
• Over £30,000 on your 2025/26 return (due 31 January 2027): MTD from 6 April 2027
• Over £20,000 on your 2026/27 return (due 31 January 2028): MTD from 6 April 2028

HMRC may write to you, but the responsibility to check and sign up is yours even if no letter arrives. If you only started self employment or letting recently, you do not join until after you have filed your first Self Assessment return showing that income.

 What counts as qualifying income, and what does not

Qualifying income is the total gross income from your self employment and property businesses, UK and overseas combined, before any expenses or allowances. A landlord collecting £36,000 of rent with £20,000 of mortgage interest and costs has qualifying income of £36,000, not £16,000.

Counts towards the threshold

• Sole trader and freelance turnover
• Locum and private practice fees paid to you gross
• UK rental income (gross)
• Overseas rental income (gross)
• Your share of rent from jointly owned property
• Content creator income, including gifted products received for content
• Trading income from a genuine financial trade (rare)

Does not count

• PAYE salary and bonuses
• RSUs, share options and ESPP shares taxed through payroll
• Capital gains, including share, fund and most crypto disposals
• Dividends and savings interest
• Pensions
• Your share of partnership profits
• Income from a limited company you own

Income covered by the £1,000 trading or property allowance, or by Rent a Room relief, does not count where it does not need to appear on your return.

 Worked example: the high earning employee

Priya earns £160,000 as an engineer at a listed tech company and receives RSUs worth £60,000 a year. She also sold some crypto at a £40,000 gain. Her qualifying income is £0. She still files a tax return, but she is not in MTD. If she later lets out her old flat for £1,800 a month, her qualifying income becomes £21,600 and she would be in from April 2028 if that level continues.

 Quarterly update deadlines

By default the quarters follow the tax year. You can elect to use calendar quarters instead (1 April to 30 June and so on), which suits anyone who reconciles monthly or files quarterly VAT returns. The election must be made before your first update of the year, and the deadlines stay the same either way.

• Quarter 1: 6 April to 5 July, due by 7 August
• Quarter 2: 6 July to 5 October, due by 7 November
• Quarter 3: 6 October to 5 January, due by 7 February
• Quarter 4: 6 January to 5 April, due by 7 May
• Final declaration: the whole tax year and all your income, due by 31 January following the tax year

Updates are cumulative: each one covers the year to date, so a mistake in quarter one can be corrected in quarter two. You submit totals by category, not receipts, but you must keep the underlying records.

MTD for your situation

Doctors, consultants and locums

Your NHS salary is taxed through PAYE and does not count. What does count is everything you are paid gross as a self employed professional: private consultations and procedures, locum sessions invoiced directly or through an agency that pays you gross, medico legal reports, expert witness work, private clinic sessions, and fees for teaching, examining or advisory roles. Add any rental income on top.

GP partners: your share of partnership profits does not count, as partnerships are not yet in MTD. But private work you invoice personally outside the partnership does.

Example: consultant anaesthetist

• NHS salary of £135,000: ignored
• Private practice fees of £38,000: counts
• Half share of a jointly owned rental producing £20,000 a year: £10,000 counts
• Qualifying income £48,000. With similar figures in 2025/26, MTD applies from 6 April 2027.

Practical points: run private income through a separate bank account, keep digital records of GMC and royal college fees, indemnity, BMA subscription, training, equipment and mileage, and make sure locum NHS pension contributions are still captured in your final declaration.

 Content creators, YouTubers and influencers

Everything you earn from content is income: AdSense and platform payouts, sponsorships and brand deals, affiliate commission, memberships such as Patreon, merchandise, live stream tips, and the market value of products or services you receive in return for content. Gifted products are the area creators most often get wrong.

• Paid in dollars? Record income gross in sterling at the date received, before any US withholding. Keep your W8BEN up to date so withholding is reduced under the UK and US treaty, and claim credit for any US tax deducted.
• Multiple platforms: each platform’s statement should be reconciled to what reached your bank, because fees are often deducted before payout. Record the gross figure and the fee as an expense.
• HMRC already has data: online platforms now report users’ earnings to HMRC under the digital platform reporting rules, and HMRC can ask anyone who pays you for information.
• VAT is separate: registration is required once turnover passes £90,000, and that includes the value of gifted items received as payment.

Example: employed creator

• AdSense £14,000 (gross, before US withholding), sponsorships £9,000, gifted products worth £2,500
• Qualifying income £25,500: under £30,000, so not in from April 2027
• If 2026/27 is similar, it is over £20,000 and MTD applies from 6 April 2028

 Employees with extra income

This is the group most likely to be caught by surprise. Many professionals at listed companies already file a tax return because of RSUs, share sales or income over £100,000. Filing a return does not put you in MTD on its own. What matters is any side income: consulting, tutoring, coaching, freelance design or development, online selling, or letting a property or a room.

If that side income passes the threshold, you will need quarterly updates for it, while your salary, RSUs, share sales and dividends continue to be dealt with in the final declaration. Getting your tax code right matters even more under MTD, because the in year estimates HMRC shows you will only be as good as the information it holds.

 Landlords

• Gross rent, not profit. Mortgage interest and expenses do not reduce qualifying income.
• UK and overseas property are added together, and to any self employment income. Each property business needs its own quarterly updates.
• Jointly owned property: only your share counts. A couple splitting £60,000 of rent equally each have £30,000. Each owner keeps their own records and files their own updates, but there are easements: you can choose to send expenses for jointly owned property at year end rather than quarterly, and keep less detailed records.
• Letting agents: agent statements usually show rent after fees. Record the full rent received by the agent as income and the fees as an expense, otherwise your income will be understated.
• Property held in a limited company pays Corporation Tax and is outside MTD for Income Tax.
• Former furnished holiday lets are now treated as part of your ordinary property business, following the abolition of the special regime in April 2025.

 Sole traders and freelancers

• The test is turnover. A contractor billing £55,000 with £30,000 of costs has qualifying income of £55,000.
• If you run more than one trade, each needs its own updates, but all turnover is added together for the threshold.
• Businesses with turnover below the VAT registration threshold (£90,000) can report expenses as a single total, which keeps quarterly updates simple.
• Keep a dedicated business bank account and capture receipts digitally as you go. Software with bank feeds does most of the work for you.

 Crypto investors and traders

For most people, buying and selling crypto is an investment taxed under Capital Gains Tax. Gains are not qualifying income, so crypto alone will not bring you into MTD. HMRC’s own guidance says only in exceptional cases would an individual’s crypto activity amount to a financial trade.

• Staking, airdrops and similar rewards are usually taxed as miscellaneous income. They do not count towards the threshold, but they must still be declared.
• Mining at a commercial scale can be a trade, in which case the income would count.
• HMRC’s visibility has changed. Under the Cryptoasset Reporting Framework, platforms have collected user and transaction details since 1 January 2026, with the first reports to HMRC due by 31 May 2027. Expect HMRC to compare those reports with your return.
• If you are in MTD for other reasons, crypto gains go in your final declaration, not your quarterly updates.

 High frequency traders, day traders and prediction markets

Frequent trading in shares, forex, options or CFDs is usually still investment for tax purposes, taxed as capital gains, however active it feels. HMRC accepts that individuals trading on their own account rarely meet the test for a financial trade. Spread betting is generally outside tax altogether, unless it is organised as your business and main source of income.

If your activity genuinely is a trade, the profits become trading income and can bring you into MTD. Working out the “gross income” of a trading activity for the threshold needs care, because it can be far higher than your profit. Prediction market platforms such as Polymarket are a developing area where the treatment depends on how the contracts work; keep complete records of every position and take advice before filing.

 What counts as a digital record?

For every transaction you need at least the date, the amount and the category. Spreadsheets are allowed if they connect to HMRC through bridging software, and figures must move between programs by digital links, not by retyping. Keep records for at least five years after the 31 January filing deadline for the year.

 Penalties: what happens if you are late

• Late submission works on points. Each late quarterly update earns one point (at most one per quarter), and reaching four points triggers a £200 penalty, with a further £200 for each late submission after that. Points can be cleared by filing everything on time for 12 months and catching up anything outstanding.
• First year soft landing: for 2026/27 HMRC is not issuing points for late quarterly updates. This does not cover the final declaration or late payment, and it does not apply to people joining in April 2027, whose points start with the first update due on 7 August 2027.
• Late payment: 3% of tax unpaid at day 15, a further 3% at day 30, then 10% a year on the balance, plus interest. Further increases have been announced from April 2027. A Time to Pay arrangement agreed early stops the penalties, though not the interest.
• From 6 April 2027 the new points regime also applies to everyone filing Self Assessment, not only those in MTD.

 Exemptions and deferrals

Exemptions are narrow. Trustees, personal representatives of someone who has died, people whose affairs are run under a power of attorney or a Court of Protection deputyship, and certain Lloyd’s underwriters are exempt. Several smaller groups were given an extra year and join from April 2027, including people claiming averaging relief, qualifying care relief, and some non resident entertainers and sportspeople.

You can also apply to be treated as digitally excluded if it is not reasonable for you to use software because of age, disability, location or religious belief. This is by application to HMRC, and if granted you carry on filing a normal tax return.

Once you are in MTD, a fall in income does not let you out straight away. You can only leave after three consecutive tax years below the threshold, or if all your self employment and property income stops.

 Five things to do now

1. Check your 2025/26 qualifying income. Add up gross self employment and property income. Over £30,000 means MTD from April 2027.
2. Separate your money. A dedicated bank account for each business or property portfolio makes digital records almost automatic.
3. Choose your software. Pick a product on HMRC’s recognised list that handles every income type you have, or a bridging tool if you prefer spreadsheets.
4. Sign up before your start date, or authorise your accountant to do it. Decide between standard and calendar quarters at the same time.
5. Set aside tax as you go. Quarterly figures make it easy to see what you owe long before 31 January.

 How TaxQube can help

TaxQube works with doctors, senior employees at listed companies, landlords, creators and traders whose tax affairs do not fit in a box. On our all inclusive monthly fee there are no extra invoices for quarterly updates or the final declaration: we set up your software, keep your records on track, file every update, manage your tax code, and handle RSUs, share portfolios, crypto and overseas income in your final declaration. We work proactively, so you hear from us before a deadline, not after it.

Not sure whether MTD applies to you? Book a call with our team and we will check your figures and tell you exactly when and how you need to start.

 Frequently asked questions

Q: Does my salary count towards the MTD threshold?

A: No. PAYE salary, bonuses and benefits are excluded. Only gross self employment and property income count.

Q: Do RSUs and share sales bring me into MTD?

A: No. RSUs taxed through payroll are employment income and share disposals are capital gains. Neither counts, but both still go on your final declaration.

Q: Is the threshold based on profit or turnover?

A: Turnover. Qualifying income is gross income before any expenses or allowances.

Q: I own a rental with my spouse. Does the full rent count?

A: No, only your share. A property producing £40,000 a year owned equally gives each of you £20,000 of qualifying income.

Q: Does crypto count?

A: Usually not. Most crypto is an investment taxed as capital gains, which does not count. Only a genuine crypto trade or commercial mining would.

Q: Do I still need to file a tax return?

A: Yes, in a new form. The final declaration, due by 31 January, replaces the Self Assessment return and must be sent through MTD software.

Q: Will I have to pay tax every quarter?

A: No. Quarterly updates are reports, not payments. Payment dates stay at 31 January and 31 July.

Q: What if my income falls below the threshold?

A: You stay in MTD until your qualifying income has been below the threshold for three tax years in a row, or your self employment and property income stops altogether.

Q: Can my accountant do this for me?

A: Yes. You can authorise an agent to sign you up, keep your records and file every update and your final declaration on your behalf.

Appoint TaxQube to manage Making Tax Digital for you

Being a regulated firm of specialist tax accountants, we can take Making Tax Digital off your hands. As your agent we sign you up with HMRC, set up compatible software, keep your digital records on track and submit every quarterly update and your final declaration on your behalf. We look after a large number of professionals from various industries, including employees with rental or side income, landlords, sole traders and creators who are being brought into MTD for the first time.

Unlike other firms, we do not charge extra for each quarterly update or for the final declaration. MTD means five submissions a year instead of one, and we make sure none are missed, so you avoid penalty points and late payment penalties while still claiming every expense and allowance you are entitled to.

We only charge a monthly retainer fee which gives you access to accredited tax advisers to help you manage your taxes and finances. Contact us for a free of charge initial consultation.

We help high earners and landlords get ready for Making Tax Digital and stay compliant with HMRC. If you need help joining MTD or submitting your quarterly updates, please do feel free to get in touch with us by completing the contact us form.