Making Tax Digital for Income Tax has been coming for years, and it finally arrived in April 2026. Most of the coverage has been either alarmist or impenetrable. Here is what it actually means.
The change in one paragraph
If you are caught, you stop filing one self assessment return a year. Instead you keep your records digitally in compatible software, send HMRC a summary update every quarter, and finish the year with a final declaration. Your tax payment dates do not change. The reporting does.
Who is caught, and when
The rollout is staged on qualifying income — gross income from self-employment and property added together, before any expenses are deducted:
- From 6 April 2026 — qualifying income above £50,000
- From April 2027 — qualifying income above £30,000
- From April 2028 — qualifying income above £20,000
The word doing the damage is “gross”
This is the single most misunderstood part of the regime, and it is where we are having the most conversations.
Take a landlord with four properties bringing in £58,000 of rent. After mortgage interest, agent fees, insurance and repairs, the taxable profit might be £19,000. That landlord is comfortably inside the first phase, despite a profit nowhere near the threshold. The test looks at the top line, not the bottom.
The second trap is aggregation. Self-employment income and property income are added together for the test. A part-time consultant turning over £32,000 who also lets a flat producing £21,000 has £53,000 of qualifying income and is in scope, even though neither source would qualify on its own.
What you actually have to do
- Keep digital records. Paper ledgers and standalone spreadsheets are no longer sufficient on their own. You need software HMRC recognises as compatible, or bridging software connected to your spreadsheet.
- Send quarterly updates. Four times a year, a summary of income and expenses for the period. These are cumulative summaries, not four mini tax returns, and they are not final figures.
- Finalise the year. After the year end you make a final declaration that pulls in everything else — employment, dividends, savings, reliefs — and settles the actual liability.
Penalties
Late submissions attract points, and once you accumulate enough points a financial penalty follows. Late payment carries its own separate penalties and interest. The design is aimed at repeated lateness rather than a single slip, but points accumulate quietly and people do not notice until the penalty arrives.
What we would do if we were you
- Check your gross figure first. Not your profit. Add self-employment turnover to gross rents and see which side of the line you are on.
- If you are close to a future threshold, prepare early. Moving to digital records under no time pressure is a very different experience to doing it in a panic.
- Choose software proportionate to your business. A landlord with two properties does not need an enterprise package. Do not let anyone sell you one.
- Get one clean quarter behind you. The first submission is the one that surfaces every problem with your record keeping. Better to find them in quarter one.
The part nobody puts in the headline
More frequent reporting is more administration. There is no honest way to dress that up. But clients who have gone through a full year of it report one genuine benefit: they know roughly what their tax bill is by the autumn instead of finding out in January. For anyone who has ever had an unpleasant surprise on 31 January, that is worth something.
Not sure whether this applies to you?
It takes about five minutes on the phone to work out. There is no charge for the conversation.