Making Tax Digital for Self-Employed: Thresholds & Deadlines

Making Tax Digital for the self-employed (MTD for Income Tax) is the biggest change to how sole traders report their earnings in decades. Since 6 April 2026, self-employed people with qualifying income over the £50,000 threshold need to keep digital records and send quarterly updates to HMRC — replacing the single annual Self Assessment return with more frequent reporting throughout the year.

This guide explains who is affected, what you need to do, and how to get started now that MTD is live.

Who Needs to Use Making Tax Digital? MTD Thresholds Explained

Making Tax Digital for Income Tax applies to self-employed sole traders and landlords registered for Self Assessment. It is being rolled out in phases based on your qualifying income — the total gross income (before expenses) from self-employment and property combined.

Phase	Start Date	Qualifying Income Threshold
1	6 April 2026	Over £50,000
2	6 April 2027	Over £30,000
3	6 April 2028	Over £20,000

Phase 1 is now live. Phases 2 and 3 are confirmed by HMRC as future start dates, so if your qualifying income is between £20,000 and £50,000 you have time to prepare before your phase begins.

What Counts as Qualifying Income?

Qualifying income is your total gross income from:

• Self-employment (turnover before deducting expenses)
• UK property (rental income)
• Foreign property

These figures are added together. For example, if Sarah earns £42,000 from her freelance design business and £12,000 from a rental property, her qualifying income is £54,000 — above the £50,000 threshold for 2026/27.

Important: This is gross income, not profit. Even if your expenses bring your taxable profit down significantly, it's the income figure that determines whether MTD applies to you.

Who Is Exempt?

Some self-employed people are exempt from MTD, including those who:

• Are digitally excluded (unable to use digital tools due to age, disability, or location)
• Have qualifying income below the current threshold
• Fall into specific categories listed on GOV.UK

If you're exempt, you continue filing a Self Assessment return as normal.

MTD Quarterly Updates and Deadlines

A quarterly update is a cumulative digital summary of your business income and expenses, running from the start of the tax year (6 April) up to the end of each quarter, submitted to HMRC through MTD-compatible software. Under MTD, you send four quarterly updates per year instead of one annual return. Because each update covers the year so far, every quarter restates your totals — your second update includes the first quarter's figures, the third includes the first two, and so on.

What You Submit

Each quarterly update includes:

• Total income received from the start of the tax year to the end of the period
• Total expenses by category (travel, office costs, stock, professional fees, etc.) for that same cumulative period

You submit category totals — not individual receipts or invoices. HMRC receives summary figures, not transaction-level detail.

Because updates are cumulative, you generally do not file separate corrections for earlier quarters. If you spot an error or add a missing transaction, you correct your digital records and your next quarterly update picks up the revised year-to-date totals — so you can fix earlier figures without resending previous updates.

You need to submit an update even if you had no income or expenses during the period.

Update Periods and Deadlines

You choose between standard periods (aligned with the tax year) or calendar periods (aligned with calendar quarters). Either way, each update is cumulative, so the period it covers grows through the year:

Standard periods (tax year, from 6 April):

Update	Period covered	Deadline
Quarter 1	6 April – 5 July	7 August
Quarter 2	6 April – 5 October	7 November
Quarter 3	6 April – 5 January	7 February
Quarter 4	6 April – 5 April	7 May

Calendar periods (from 1 April):

Update	Period covered	Deadline
Quarter 1	1 April – 30 June	7 August
Quarter 2	1 April – 30 September	7 November
Quarter 3	1 April – 31 December	7 February
Quarter 4	1 April – 31 March	7 May

Notice that each period covered starts from the same date — that is the cumulative model in action. Choose your period type in your software before your first update. You can switch to a different type, but only from the start of the next tax year.

Final Declaration

After your four quarterly updates, you file a final declaration by 31 January following the end of the tax year. This replaces the traditional Self Assessment return and is where you:

• Confirm your quarterly figures are correct
• Make any year-end adjustments
• Add other income (dividends, savings, pensions, employment)
• Claim tax reliefs
• Receive your final tax calculation

Payment dates remain the same — 31 January and 31 July — as explained in our guide on payments on account.

MTD-Compatible Software for Sole Traders

MTD-compatible software is any HMRC-recognised application that can:

• Create and store digital records of income and expenses
• Submit quarterly updates to HMRC
• File your final declaration

HMRC maintains a list of compatible software on GOV.UK. Options range from free tools to commercial packages like FreeAgent, Xero, and QuickBooks.

Can You Still Use a Spreadsheet?

Yes, but with a catch. You can continue recording transactions in a spreadsheet, but you'll need bridging software that connects your spreadsheet to HMRC's systems for submitting updates. The spreadsheet alone isn't sufficient — it needs that digital link to HMRC.

If you're already using accounting software, check whether your provider has added MTD compatibility. Many providers have released MTD-ready updates.

How to Sign Up for Making Tax Digital

You sign up for MTD for Income Tax through your HMRC online account. HMRC has written to self-employed people who need to join, so you may have already received a letter. If you have not signed up yet and your qualifying income exceeds £50,000, you should do so as soon as possible.

Before you sign up, you'll need:

• Your Government Gateway login
• A submitted Self Assessment return within the last 2 years
• Your business start date, name, and address
• Your chosen MTD-compatible software

Steps to sign up:

1. Check your qualifying income to confirm you're above the threshold
2. Choose and set up your MTD-compatible software
3. Go to Sign up for Making Tax Digital for Income Tax on GOV.UK
4. Sign in with your Government Gateway credentials
5. Report your self-employment and any property income sources
6. Complete identity verification
7. Confirm which tax year you'll start using the service

Timing: HMRC advises signing up now if you are required to use MTD from April 2026. You need to have submitted a Self Assessment return within the last two years before you can sign up.

Digital Record Keeping Requirements for Self-Employed

MTD requires you to keep digital records of all business income and expenses, recording them in compatible software (or a spreadsheet with bridging software).

For each transaction, record:

• Date
• Amount
• Category (sales, travel, office supplies, professional fees, etc.)

If you already keep digital records — even a basic spreadsheet — you're partway there. Our guide on what records to keep covers the full list of records HMRC expects.

Paper backup: You can still keep paper receipts and documents as evidence. HMRC's requirement is that your primary records are digital and held in compatible software.

MTD Late Filing Penalties and the First-Year Grace Period

The MTD penalty system uses a points-based approach where you accumulate points for late quarterly updates before facing a financial penalty. HMRC has introduced a grace period for self-employed people joining MTD in the 2026/27 tax year:

• No penalty points for late quarterly updates during the first tax year (2026/27)
• Penalties do still apply for late final declarations and late payment of tax

After the grace period, a new points-based penalty system applies:

1. You receive one penalty point for each late quarterly update
2. A £200 penalty is charged when you reach 4 points
3. Points can be removed by submitting on time going forward

This is more forgiving than the old fixed-penalty approach, where a single late return triggered an immediate £100 fine. Under the points-based system, occasional late submissions do not result in an immediate penalty.

Tax Payments and Rules That Stay the Same

MTD changes how you report income, but several things remain unchanged:

• Payment dates — tax is still due on 31 January and 31 July
• Payments on account — the two-instalment advance payment system continues
• Allowable expenses — the same expenses remain deductible
• Tax rates and thresholds — your profit is still taxed at your marginal rate
• Trading allowance — the £1,000 tax-free threshold still applies (2026/27)
• National Insurance — Class 4 NI contributions continue as before (Class 2 was abolished from April 2024)

Preparing for Making Tax Digital: Self-Employed Checklist

If you're self-employed with qualifying income over £50,000, here is what to do now that MTD is live:

1. Check your qualifying income — add up gross self-employment turnover plus any rental income for 2024/25
2. Choose software — browse HMRC's compatible software list and pick one that suits your business
3. Set up digital records — start recording income and expenses digitally if you haven't already
4. Sign up on GOV.UK — register for MTD through your HMRC online account
5. Choose your update periods — standard (tax year) or calendar (quarter-end)
6. Mark the deadlines — diarise the four quarterly update dates plus the 31 January final declaration
7. Submit your 2024/25 return — file your Self Assessment return before transitioning to MTD

If your income is between £30,000 and £50,000, you have until April 2027 — but starting digital record keeping now will make the transition smoother.

Example: James is a freelance consultant earning £62,000 per year. He currently tracks expenses in a spreadsheet and files one Self Assessment return each January. Now that MTD is live, he needs to switch to MTD-compatible software (or add bridging software to his spreadsheet), submit quarterly summaries of his income and expenses, and file a final declaration by 31 January 2028 for the 2026/27 tax year.

Frequently Asked Questions

Do I need Making Tax Digital if I also have a PAYE job?

It depends on your self-employment and property income. If your qualifying income from self-employment and property exceeds the threshold, MTD applies to those income sources — regardless of any PAYE employment. Your employment income is reported separately through your employer.

Will MTD mean I pay more tax?

No. MTD changes how you report income, not how much tax you owe. Your tax calculation, allowable expenses, and rates remain the same. The quarterly updates give HMRC a more current picture of your earnings, but they don't create additional tax.

Can I sign up voluntarily before the requirement applies?

Yes. You can choose to sign up early even if your income is below the current threshold. Some sole traders prefer to start early to get used to the software and quarterly rhythm before it becomes mandatory. Signing up early also helps avoid common Self Assessment mistakes during the transition.

What if I have multiple self-employed businesses?

Each self-employment source is reported separately within MTD. You submit quarterly updates covering income and expenses for each business, but through a single MTD account. Your qualifying income is the combined total from all sources.

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This guide is for informational purposes only and does not constitute tax, legal, or financial advice. Tax rules change frequently. Always verify current requirements on GOV.UK or consult a qualified accountant for your specific situation.

Official Sources

• Making Tax Digital for Income Tax for sole traders and landlords: step by step — GOV.UK
• Find out if and when you need to use Making Tax Digital for Income Tax — GOV.UK
• Send quarterly updates — GOV.UK
• Sign up for Making Tax Digital for Income Tax — GOV.UK
• Find compatible software — GOV.UK