Who is affected in April 2026?
From 6 April 2026, Making Tax Digital for Income Tax (MTD IT) applies to:
- Sole traders
- Landlords
- Individuals with combined self-employment and property income
But only if your total gross income from those sources is over £50,000 per year.
This is based on turnover before expenses, not profit.
If your income is below £50,000, you are not included in 2026. The threshold reduces in later years.
What actually changes?
If you fall within scope, three main things change:
You must keep digital records
Paper records alone will no longer be compliant. You’ll need to maintain digital records using compatible software. This can include accounting software or approved digital tools that meet HMRC requirements.
You submit quarterly updates
Instead of reporting once a year, you will send four summary updates per year to HMRC.
These updates show:
- Total income
- Total expenses
They are not full tax returns and they do not trigger a tax bill.
You complete a year-end finalisation
At the end of the tax year, you’ll still complete a final declaration. This is where:
- Adjustments are made
- Allowances are claimed
- Other income is included
- Your final tax position is calculated
So while reporting becomes quarterly, tax calculation remains annual.
Does this mean more tax?
No.
Making Tax Digital does not increase tax rates. It changes how and when information is reported.
Your tax payment dates remain:
- 31 January
- 31 July (if payments on account apply)
What if your income fluctuates?
MTD status is based on previous tax return data.
If your qualifying income goes above £50,000, you will be brought into the system the following tax year. If your income drops below the threshold, different rules may apply depending on the circumstances.
The key point: eligibility is reviewed annually.
Why is this happening?
HMRC’s aim is to:
- Reduce reporting errors
- Encourage up-to-date record keeping
- Increase transparency
- Modernise the tax system
For businesses already using accounting software, the change may feel minimal. For those relying on spreadsheets or paper, it represents a bigger shift.
What should you do now?
If you think you may be affected in April 2026:
- Check your total gross self-employment and rental income
- Review how you currently keep records
- Ensure your software is MTD-compatible
- Avoid leaving changes until early 2026
The businesses that prepare early will avoid last-minute pressure.
The bottom line
April 2026 is the first major phase of MTD for Income Tax.
If your combined business and rental income exceeds £50,000, quarterly reporting becomes part of your compliance routine.
It’s not four tax returns.
It’s not four tax bills.
It’s structured digital reporting.
The sooner your systems are aligned, the smoother the transition will be.
If you’re unsure whether you fall within scope, 123Tax can help you review your position and get ready.