What needs to be reported under MTD for Income Tax?

From April 2026, Making Tax Digital (MTD) for Income Tax will begin its phased rollout - marking one of the most significant changes to the UK’s personal tax reporting framework in decades. MTD for self-employed, sole traders and landlords marks a shift away from annual Self Assessment towards structured digital reporting with new responsibilities, new software requirements and new timelines.

Here, we discuss what needs to be reported under MTD for Income Tax, who will be affected and what taxpayers should be doing now to prepare.

Who must report under MTD for Income Tax?

MTD for Income Tax applies to the self-employed, sole traders and landlords with qualifying income above HMRC thresholds. Qualifying income is the total gross income from self employment and/or property before expenses. Rollout is phased:

• From 6 April 2026: Qualifying income over £50,000.
• From 6 April 2027: Qualifying income over £30,000.
• From 6 April 2028: Qualifying income over £20,000.

MTD currently excludes partnerships, trust income, estates and certain specialist cases, but individual partners may still be caught if they separately meet the qualifying criteria.

What needs to be reported under MTD?

MTD replaces the single annual Self Assessment return with structured digital reporting, comprising four quarterly updates, a Final Declaration and year end adjustments as needed.

1. Quarterly updates: Income & expenses

Every quarter, affected taxpayers must use HMRC compatible software to submit a simple digital summary of their year to date business income and expenses.

Quarterly updates must include:

• Total income for each business or property income stream
• Total expenses, broken down into HMRC approved categories
• Net profit figures, where simplified accounting applies

Taxpayers do not submit detailed receipts or individual invoice lines; however, the underlying transaction-level digital record‑keeping is mandatory.

Quarterly deadlines

By default, quarterly periods follow the tax year cycle:

• Q1: 6 Apr – 5 Jul → Deadline 7 Aug
• Q2: 6 Jul – 5 Oct → Deadline 7 Nov
• Q3: 6 Oct – 5 Jan → Deadline 7 Feb
• Q4: 6 Jan – 5 Apr → Deadline 7 May

Calendar quarter reporting is permitted by election, though deadlines remain unchanged.

2. Digital record‑keeping requirements

From April 2026, the self-employed, sole traders and landlords above the threshold must maintain digital records of every business transaction, including:

• Date of transaction
• Amount received or spent
• Category (e.g., turnover, marketing costs, premises expenses)

Paper based bookkeeping or retrospective spreadsheet summaries will no longer meet HMRC requirements unless used through HMRC approved bridging software.

3. Year‑end reporting: the Final Declaration

The traditional Self Assessment return is replaced by a Final Declaration, due by 31 January following the tax year end.

The Final Declaration must confirm:

• All business income and expenses (incorporating the quarterly updates)
• Adjustments (e.g. disallowable expenses, capital allowances)
• Other personal income HMRC holds (employment, pensions)
• Additional income HMRC does not automatically receive (e.g. dividends, interest)

This step finalises the tax position for the year.

4. MTD for Income Tax penalties

HMRC operates a points based penalty system for late submissions under MTD, with financial penalties applied once thresholds are exceeded.

Your MTD for Income Tax compliance checklist

With April 2026 approaching, those impacted should:

Confirm eligibility

Review 2024/25 Self Assessment figures to determine whether qualifying income exceeds £50,000.

Select MTD compatible software

HMRC recognised accounting software is essential for maintaining digital records and submitting quarterly updates. ‑ accounting software is essential for maintaining digital records and submitting quarterly updates.

Prepare your digital workflow

Establish a process for digitising receipts, recording transactions in real time and categorising expenses correctly.

Understand your reporting cycle

Ensure you know the four submission deadlines and file on time.

We’re here to help

We have been working closely with HMRC, Xero and our clients to understand the requirements, the impact and how to efficiently navigate.

As the UK’s #1 adviser for MTD for Income Tax, we have created market-leading solutions to ensure we are at the forefront of MTD compliance and deliver the best support for our clients.

Our dedicated team is on hand to help you stay compliant, choose and seamlessly implement software that works for you, as well as help you leverage the technology efficiencies and make confident business decisions.

Contact us today to find out how we can support you with Making Tax Digital for Income Tax.