Making Tax Digital for Income Tax 2026: What Changed from 6 April

Making Tax Digital for Income Tax is now live for the first mandated group.

From 6 April 2026, some sole traders and landlords must keep digital records, use compatible software, send quarterly updates to HMRC, and submit their Self Assessment tax return through that software.

The important point for PayeTax readers: PAYE income does not count towards the MTD qualifying-income threshold, but you can still be affected if you have enough self-employment or property income alongside your salary.

Quick Summary

• MTD for Income Tax started on 6 April 2026 for sole traders and landlords whose relevant qualifying income was over £50,000.
• The rollout steps down to £30,000 from 6 April 2027 and £20,000 from 6 April 2028.
• Qualifying income means gross income from self-employment and property, not PAYE salary, dividends, pensions, or an individual partner's share of partnership profit.
• Quarterly updates are summaries of self-employment and property income and expenses. They are not tax returns.
• HMRC says it will not apply penalty points for late quarterly updates during the 2026 to 2027 tax year, but late tax-return and payment penalties can still apply.

Who Needs to Use MTD for Income Tax?

HMRC says you need to use Making Tax Digital for Income Tax if all of these apply:

• you are a sole trader or landlord registered for Self Assessment
• you receive income from self-employment, property, or both
• your qualifying income is above the relevant threshold for the rollout year

The official phased dates are:

HMRC says partnerships will also come into MTD for Income Tax in future, but the timeline has not yet been set out.

You can check the official HMRC guidance here: find out if and when you need to use Making Tax Digital for Income Tax.

What Counts as Qualifying Income?

Qualifying income is the total gross income you get in a tax year from:

• self-employment
• UK property
• foreign property, where relevant

Gross income means income before deducting expenses. HMRC also describes this as turnover.

Other income sources reported through Self Assessment do not count towards the MTD qualifying-income threshold, including:

• employment income taxed through PAYE
• dividends, including dividends from your own company
• State Pension or private pension income
• an individual partner's share of partnership profit

That means a PAYE salary alone does not bring you into MTD for Income Tax. But a salary plus enough self-employment or property income can still leave you in scope.

Example:

• PAYE salary: £60,000
• Rental income before expenses: £25,000
• Self-employed income before expenses: £27,000
• Qualifying income for MTD: £52,000

On those facts, the PAYE salary is not part of the MTD qualifying-income test. The combined self-employment and property income is.

HMRC has a separate explainer here: work out your qualifying income for Making Tax Digital for Income Tax.

What Actually Changes?

MTD for Income Tax does not simply mean "file Self Assessment a bit earlier". The workflow changes during the year.

If you are required to use it, you or your agent will need to:

1. Choose software that works with MTD for Income Tax.
2. Sign up for MTD for Income Tax.
3. Keep digital records for self-employment and property income and expenses.
4. Send quarterly updates to HMRC through your software.
5. Make any year-end adjustments.
6. Submit your tax return through compatible software by the normal deadline.

PayeTax is not MTD filing software and does not send quarterly updates to HMRC. Use PayeTax to understand your PAYE salary, take-home pay, and marginal deduction picture, especially if your side income means you are reviewing your wider tax position.

Calculate your PAYE take-home pay

Quarterly Updates: What They Are and What They Are Not

HMRC's quarterly updates are summaries. Your software adds together totals from your digital records for each self-employment or property business and sends those totals to HMRC.

They are not full tax returns, and HMRC says you do not need to make accounting or tax adjustments before sending a quarterly update.

The deadlines are the same whether you use standard or calendar update periods:

If your accounting period runs from 1 April to 31 March, your software may let you use calendar update periods instead. Those periods end on 30 June, 30 September, 31 December, and 31 March, with the same deadlines above.

Each quarterly update covers the tax year to date, not just the previous three months. That matters because later corrections can flow into the next update rather than requiring every earlier update to be resent.

HMRC's detailed guidance is here: send quarterly updates.

Digital Records and Software

You need software that works with MTD for Income Tax. HMRC says software must let you:

• create, store, and correct digital records of self-employment and property income and expenses
• send quarterly updates
• add other income sources and submit your tax return

This does not necessarily mean a full accounting package. HMRC describes different types of software, including products that create digital records and products that connect to existing records such as spreadsheets.

The key is that your software setup has to meet the MTD requirements for your income sources.

Read HMRC's software guidance here: choose the right software for Making Tax Digital for Income Tax.

What If You Also Have PAYE Income?

This is where many people get caught out.

If you are employed and have a side business or rental property, PAYE may still collect tax from your salary as normal. MTD for Income Tax is about the self-employment and property side of your tax affairs.

You may still need to use MTD if your qualifying self-employment and property income is above the threshold, even though your main job is taxed through payroll.

For example:

• a consultant with a PAYE job and a sizeable freelance business
• an employee who also rents out property
• a landlord who also has salary, savings interest, or student loan deductions

HMRC says other income sources, including PAYE, may be included in tax bill estimates depending on your software and the data HMRC already holds. But your quarterly updates are still about self-employment and property totals.

Use PayeTax for the PAYE side of the picture:

• check your take-home pay
• review National Insurance deductions
• use Director Intelligence if you also run a limited company
• read how PayeTax handles accuracy and limitations

What About Penalties?

There is a limited first-year easing for quarterly updates, but it is not a general free pass.

For the 2026 to 2027 tax year, HMRC says it will not apply penalty points for late quarterly updates. You still need to send the quarterly updates before you can submit your tax return.

Late tax-return penalties and late payment consequences can still apply. HMRC also says current penalties still apply to previous tax years, such as the 2025 to 2026 Self Assessment tax return due by 31 January 2027.

After the 2026 to 2027 tax year, late quarterly updates move into a points-based penalty system. HMRC's published guidance says the threshold is 4 points, and reaching that threshold leads to a £200 penalty.

Read the official guidance here: penalties for Making Tax Digital for Income Tax.

What Should You Do Now?

1. Check whether you are in the first group

Look at your self-employment and property income, before expenses, on the relevant Self Assessment return. Do not include PAYE salary in that threshold test.

HMRC may write to you if it identifies that you are over the threshold, but HMRC also says you remain responsible for checking if and when you need to use MTD.

2. Choose software before signing up

If you are required to use MTD for the 2026 to 2027 tax year, HMRC says you should sign up now. You must be registered for Self Assessment and have submitted a tax return in the last 2 years.

If you use an accountant or tax agent, agree who will sign up, who will keep records, and who will submit each update.

Official sign-up guidance: sign up for Making Tax Digital for Income Tax.

3. Do not leave the PAYE side out of your planning

MTD does not change your payslip, but your final tax position can still depend on salary, student loan deductions, pension contributions, savings interest, dividends, and property or business income.

If your PAYE salary has changed, update your take-home-pay estimate before you make wider planning decisions:

Calculate your current PAYE position

4. Keep the source of truth close

MTD for Income Tax is live policy, but implementation guidance can still change. Check GOV.UK before acting, especially if your circumstances are unusual, you have multiple businesses, jointly let property, foreign property income, or possible exemption grounds.

Frequently Asked Questions

Did Making Tax Digital for Income Tax start in April 2026?

Yes. It started on 6 April 2026 for the first mandated group of sole traders and landlords whose qualifying income was over the first rollout threshold.

Does PAYE income count towards the MTD threshold?

No. HMRC says qualifying income is self-employment and property income. PAYE salary is not included in the qualifying-income threshold, although you still report relevant non-MTD income when completing your tax return through compatible software.

Are quarterly updates tax returns?

No. HMRC describes quarterly updates as summaries of self-employment and property income and expenses. You still submit a tax return after the end of the tax year.

Are there penalties for late quarterly updates in 2026 to 2027?

HMRC says it will not apply penalty points for late quarterly updates during the 2026 to 2027 tax year. That does not remove tax-return or payment deadlines.

Does PayeTax submit MTD updates?

No. PayeTax is not accounting software and does not submit updates or tax returns to HMRC. Use it to understand PAYE take-home pay and deduction context alongside your official MTD software or tax adviser.

Official Sources Checked

• Find out if and when you need to use Making Tax Digital for Income Tax
• Work out your qualifying income for Making Tax Digital for Income Tax
• Sign up for Making Tax Digital for Income Tax
• Create digital records
• Send quarterly updates
• Choose the right software for Making Tax Digital for Income Tax
• Penalties for Making Tax Digital for Income Tax

This article is for general information only. It is not tax advice, accounting advice, or MTD software guidance for your specific circumstances. Check GOV.UK and speak to a qualified tax adviser or accountant if you are unsure.