BIRDS ACCOUNTANTS
BIRDS ACCOUNTANTS
Sole traders · landlords · Making Tax Digital for Income Tax
Who it applies to, when it starts, what you send to HMRC and what happens if you are late, in plain English.
Written by Nicola Bird, CIMA-qualified accountant. Last checked 10 November 2026.
It is HMRC's new way of reporting self-employment and property income. Instead of one tax return a year from a pile of paperwork, you keep your records in HMRC-recognised software and send a short summary to HMRC every quarter. You then finish the year with a tax return through the same software by 31 January.
It depends on your qualifying income: your total self-employment and property income before expenses. HMRC looks at an earlier year's tax return to decide when you start:
Income from a job (PAYE) does not count towards qualifying income. HMRC normally writes to you, but it is still your responsibility to check. Some people are exempt, for example if they are digitally excluded and cannot reasonably use software.
For standard update periods, each update covers the tax year so far:
Then your tax return for the year is due by 31 January. If you start on 6 April 2026, that is 31 January 2028. You still file a normal Self Assessment return for the years before you start.
MTD brings a points-based system. For the 2026/27 tax year, HMRC will not give penalty points for late quarterly updates, but you still have to send them all before you can file your return. From 2027/28, each missed deadline gets a point, and when you reach 4 points you get a £200 penalty. Late payment penalties also change, and the sooner you pay, the lower they are.
I offer Making Tax Digital set-up and quarterly updates as part of my fixed-price packages.
These are the rates for England, Wales and Northern Ireland. Scotland has its own Income Tax bands, but National Insurance and the allowances are the same.
| 2025/26 | 2026/27 | |
|---|---|---|
| Trading allowance (gross self-employed income) | £1,000 | £1,000 |
| Personal Allowance (tax-free income) | £12,570 | £12,570 |
| Income Tax basic rate (£12,571 to £50,270) | 20% | 20% |
| Income Tax higher rate (£50,271 to £125,140) | 40% | 40% |
| Class 4 National Insurance on profits £12,570 to £50,270 | 6% | 6% |
| Class 4 National Insurance on profits over £50,270 | 2% | 2% |
| Class 2 small profits threshold (Class 2 treated as paid above this) | £6,845 | £7,105 |
| Voluntary Class 2 if profits are below the threshold | £3.50 a week | £3.65 a week |
Making Tax Digital for Income Tax: if your qualifying income (self-employment plus property, before expenses) was over £50,000 in 2024/25, you have had to use it since 6 April 2026. Over £30,000 in 2025/26 means you start on 6 April 2027, and over £20,000 in 2026/27 means you start on 6 April 2028. Sources: GOV.UK National Insurance rates, GOV.UK Income Tax rates, GOV.UK Making Tax Digital.
From 6 April 2026 if your qualifying income was over £50,000 in 2024/25, from 6 April 2027 if over £30,000 in 2025/26, and from 6 April 2028 if over £20,000 in 2026/27.
Turnover. Qualifying income is your total self-employment and property income before expenses. Job income through PAYE does not count.
7 August, 7 November, 7 February and 7 May, for the periods ending 5 July, 5 October, 5 January and 5 April.
Not for the 2026/27 tax year: HMRC will not give penalty points for late quarterly updates in that year. From 2027/28, each missed deadline earns a point and 4 points means a £200 penalty.
Yes. After your four quarterly updates, you submit your tax return through your software by 31 January after the tax year ends.
Yes. An agent can sign you up, set up the software and send your quarterly updates and tax return for you.
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Related: Online accountant for sole traders · What's new for sole traders · GOV.UK: do I need to use MTD?
This page is general information, not tax advice. Get in touch about your own situation.
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