Making Tax Digital for Income Tax: Who Needs to Comply by April 2026?
Making Tax Digital (MTD) for Income Tax is on the horizon — and for many individuals, the first compliance deadline is fast approaching.
If you’re self-employed, a landlord, or have a combination of qualifying income sources, you may be required to join the scheme from April 2026. In this article, we’ll break down who is affected, what “qualifying income” means, and how to work out if you’re in scope.
Who Needs to Join MTD in April 2026?
You will need to comply with MTD for Income Tax from 6 April 2026 if:
You are an individual, and
You have a combined turnover of more than £50,000 per year, and
Your income comes from either self-employment, UK property, or foreign property (or a combination of these)
This includes:
Sole traders
Landlords (including those with holiday lets or overseas property)
Individuals with both rental and self-employment income
This first wave of MTD will not affect partnerships, limited companies, or those earning only through employment or pensions — though future phases of the scheme may extend the requirements.
What Is “Qualifying Income”?
Your qualifying income is calculated as your total gross income (before expenses) from self-employment and property letting.
It does not include:
Employment income (PAYE)
Dividends
Pensions
Interest or investment income
Income from partnerships or limited companies (for now)
So if you’re a sole trader earning £30,000 and also receive £25,000 in rental income, your combined qualifying income is £55,000 — which means you are in scope for MTD from April 2026.
What Tax Year Is Used to Assess This?
HMRC will assess whether you’re within scope by looking at your submitted tax return for the 2023/24 tax year (which is due by 31 January 2025).
If your combined qualifying income on that return is over £50,000, you will be required to comply with MTD for Income Tax from 6 April 2026.
If your income is between £45,000 and £50,000, you may still receive a letter from HMRC warning that you’re close to the threshold and should start preparing.
What If I Have Multiple Income Streams?
MTD requires separate digital records and separate quarterly updates for each qualifying income stream.
For example, if you:
Run a small business (self-employment), and
Let out a property (UK or foreign)
You will need to:
Submit 4 quarterly updates for self-employment
Submit 4 quarterly updates for rental income
Submit 1 final declaration covering all income and any adjustments
That’s a total of 9 updates per year — all of which must be submitted through MTD-compliant software.
What Happens If I Don’t Comply?
HMRC is introducing a new points-based penalty system for late or missed submissions. If you fail to meet quarterly deadlines, you’ll receive penalty points, which can lead to fines of £200 or more once thresholds are breached.
Being prepared is the best way to avoid both penalties and panic.
What Should I Do Now?
If you think you might be over the £50,000 threshold, here’s how to prepare:
Check your 2023/24 turnover — add together all income from self-employment and property (before expenses).
Keep an eye out for a letter from HMRC — these are being sent out from April 2025.
Start thinking about MTD-compliant software — you’ll need digital tools to submit quarterly updates.
Get professional support — working with your accountant now will make the transition far easier.
How Exchange Accountants Can Help
We’re already helping individuals and businesses prepare for MTD for Income Tax. Whether you’re unsure if you’re in scope or you’re looking for the right digital tools, we’re here to help you:
Understand your MTD responsibilities
Set up or transition to MTD-compliant software (we recommend Xero and FreeAgent)
Handle quarterly submissions and your final declaration
Minimise admin and avoid HMRC penalties
📞 Ready to find out if MTD applies to you?
Book a Discovery Call to get personalised advice and next steps.
