Making Tax Digital for Income Tax: what sole traders and landlords need to do

Making Tax Digital for Income Tax (often shortened to MTD for Income Tax, or MTD for ITSA) is the biggest change to how self-employed people and landlords deal with HMRC since online Self Assessment arrived. It is no longer a future plan: the first group of sole traders and landlords started on 6 April 2026, and two more groups follow in 2027 and 2028.

This guide explains who is affected, when, what you actually have to do, and how to get your receipts into a state where quarterly updates are a quick job rather than a scramble.

Who has to use it, and when

You need to use MTD for Income Tax if you are a sole trader or landlord registered for Self Assessment, you have self-employment or property income (or both), and your qualifying income is over the threshold for the relevant tax year. HMRC's eligibility guidance sets out the timetable:

Qualifying income is your gross self-employment income plus your gross property income: turnover and rent received, before expenses. That catches people out. A landlord with £34,000 of rent and £12,000 of costs has a profit of £22,000, but their qualifying income is £34,000, which is over the £30,000 threshold.

HMRC reviews your Self Assessment return each year and writes to you if you are over the line. If you do not get a letter, it is still your responsibility to check, so use the checker tool on the gov.uk page above if you are anywhere near a threshold. Partnerships are not included yet; HMRC has said it will set out their timeline later. Some people can be exempt, for example if they are digitally excluded, and HMRC has a separate page on exemptions.

What changes in practice

Under MTD for Income Tax you do three things differently.

1. Keep digital records

You create a digital record of each item of self-employment and property income and expense, using software that works with MTD. HMRC's digital records guidance says each record needs:

• the amount
• the date the income was received or the expense was incurred
• the category, using the same income and expense categories as Self Assessment

You must also carry on keeping your normal records. The same guidance says you still need to keep original records or supporting documents (or copies of them), such as bank statements and invoices. A digital record of "£46.20, 14 October, repairs" does not replace the receipt that proves it.

2. Send quarterly updates

Your software sends HMRC a summary of your income and expenses every quarter. The updates are cumulative: each one covers the tax year so far, not just the latest three months. HMRC's quarterly updates guidance lists the standard periods:

If your accounts run from 1 April to 31 March you can choose calendar update periods instead (ending 30 June, 30 September, 31 December and 31 March). The deadlines are the same. You have to choose calendar periods in your software before you send your first update, and you cannot switch back for the rest of that tax year.

3. Submit a tax return through your software

After the year ends you finalise your figures, add any other income and submit your return through MTD-compatible software by 31 January, the same deadline as now.

What about penalties?

MTD comes with a points-based penalty system for late submissions. According to HMRC's MTD penalties guidance, there are no penalties for missing a quarterly update deadline in the 2026 to 2027 tax year. From the following tax year, each missed deadline earns a point, and at 4 points you get a £200 penalty, with a further £200 for each later missed deadline while you stay at the threshold. Late payment penalties are separate and not points-based.

The soft start for quarterly updates is a good reason to use this year to get your routine right rather than a reason to ignore it.

Spreadsheets, apps and "digital links"

You do not have to do everything in one product. Plenty of people keep receipts in one place, a spreadsheet or bookkeeping app in another, and use separate software to file. The rule is that once data is in your records, moving it between products must be done through a digital link, not by retyping it or copying and pasting. HMRC's digital records page gives examples of acceptable links, including CSV importing and exporting, downloading and uploading files, and API transfers.

That is where a receipts app fits. Receipts Keeper is not an MTD filing product, so it does not send updates to HMRC. What it does is capture each receipt (supplier, date, total and VAT), keep the image safe and let you export a CSV that you or your accountant import into the MTD software you file with. That gives you clean source data and a proper digital link.

A simple routine that works

1. Capture receipts the day you get them. Photograph a receipt before it goes in a pocket, glovebox or bin. Till receipts fade, and that is a whole separate problem.
2. Categorise as you go. Use the Self Assessment categories your software and accountant use, so nothing needs re-sorting at the quarter end.
3. Check against your bank once a month. Any business payment without a receipt is a gap to chase while you still remember what it was.
4. Export before each deadline. A few days before 7 August, 7 November, 7 February and 7 May, export the quarter, import it into your MTD software and check the totals.
5. Keep the evidence. Keep receipts and statements for at least five years after the 31 January deadline for the tax year they relate to.

If you are in the 2027 group

If your qualifying income for 2025 to 2026 is over £30,000, you will start on 6 April 2027. The months before that are the time to choose software, decide whether your accountant will file for you, and get into the habit of digital receipts. Records you have built up over a year make the switch much less painful than starting from a carrier bag of paper in March.

Sources

• Find out if and when you need to use Making Tax Digital for Income Tax, GOV.UK
• Create digital records for Making Tax Digital for Income Tax, GOV.UK
• Send quarterly updates, GOV.UK
• Penalties for Making Tax Digital for Income Tax, GOV.UK

This article is general information, not tax advice. Rules and thresholds change, so check your own position with HMRC or an accountant before relying on it.