Making Tax Digital for Income Tax is now live — is your business in the next wave?

If you're a sole trader or landlord, you've probably heard the phrase "Making Tax Digital" mentioned more than once over the past year or two. As of 6 April 2026, it's no longer something on the horizon — Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is now up and running for the first group of taxpayers, and a second, much larger group will be brought in from April 2027.

Here in Bury, Greater Manchester, we're already helping clients get their systems in order, so we thought it worth setting out plainly what's changed and what's coming next.

Who's affected right now

If your total self-employment and/or property income was above £50,000 in the 2024-25 tax year, you should already have moved across to MTD for Income Tax from 6 April 2026. If that applies to you and you haven't yet made the switch, it's still worth getting sorted — HMRC reviews Self Assessment returns each year to work out who's in scope, so this isn't something that quietly goes away if it's missed.

Who's next

From April 2027, the threshold drops to £30,000 of qualifying income, based on what you earned in the 2025-26 tax year. That's a significant widening of the net, bringing in a lot of smaller sole traders and landlords who haven't had to think about this before. A further drop to £20,000 is planned for April 2028, which will pull in most remaining self-employed people and landlords still filing the old-fashioned way.

If your income sits somewhere in the £20,000 to £50,000 range, it's a good time to start thinking about this now rather than in the run-up to April 2027.

What it actually involves

Rather than one tax return a year, MTD for Income Tax means keeping digital records of your income and expenses throughout the year, using software that can connect to HMRC, and sending quarterly updates rather than a single annual submission. At the end of the year, you'll still need to submit a final declaration to confirm your total income and any adjustments, similar in spirit to the old Self Assessment return.

The main practical change is the record-keeping habit — spreadsheets alone won't cut it unless they're linked to bridging software, so most people find it easier to move to proper cloud accounting software sooner rather than later.

What happens if you're late

HMRC has built in a bit of leeway while the new system beds in. There are no penalties for missing a quarterly update deadline during the 2026-27 tax year, though the updates still need to happen before your return can be filed. Late submission of the tax return itself works on a points system — one point per missed deadline, with a £200 penalty once you reach four points. Late payment penalties also apply, with slightly more breathing room in your first year than in later years.

None of this is designed to catch people out, but it does reward getting your systems set up properly rather than trying to catch up after the event.

Our advice

If you're already in MTD for Income Tax, make sure your software and record-keeping are actually working the way they should — the quarterly updates are only useful if the underlying figures are accurate. If you're due to join from April 2027, the sensible move is to start keeping digital records now, well before it becomes compulsory, so the transition is a non-event rather than a scramble.

If you'd like a hand working out where you stand or getting your bookkeeping ready, we're always happy to talk it through — just get in touch.