Making Tax Digital (MTD) and Why It Matters
Who MTD affects, the quarterly deadlines, what it means for CIS refunds and how to get ready without the stress.
Making Tax Digital for Income Tax (MTD) is the new way self-employed people and landlords report their income to HMRC. Instead of one tax return a year, you keep digital records and send HMRC a short update every quarter, then finish the year with your usual return.
It’s the biggest change to Self Assessment in decades, and it’s already here. This guide explains who it affects, when you need to start and how to get ready without the stress.
When did MTD start?
MTD for Income Tax began on 6 April 2026. If you’re in it, you report your income and costs to HMRC four times a year, before completing your end-of-year tax return as normal.
| Quarter ends | Update due by |
|---|---|
| 5 July | 7 August |
| 5 October | 7 November |
| 5 January | 7 February |
| 5 April | 7 May |
When do I need to start?
MTD applies to you if you’re registered for Self Assessment and you earn income from self-employment as a sole trader, from property as a landlord, or both. It’s being introduced in stages, based on your qualifying income:
| Based on your tax return for | Qualifying income over | You start MTD from |
|---|---|---|
| 2024 to 2025 | £50,000 | 6 April 2026 |
| 2025 to 2026 | £30,000 | 6 April 2027 |
| 2026 to 2027 | £20,000 | 6 April 2028 |
Qualifying income is your total turnover from self-employment and property added together, before expenses. So a builder with £50,000 of income and £15,000 of costs has qualifying income of £50,000, not £35,000. That’s over £30,000, so they’ll need to join MTD from 6 April 2027 at the latest.
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How do I get ready for MTD?
Seven practical steps take you from “is this me?” to filing with confidence:
- Check your income. Use the table above to see when you need to start. Not sure? Get in touch and we’ll tell you.
- Sign up for MTD. You can sign up on GOV.UK, or ask your accountant to register you.
- Open a separate bank account just for your business or rental income and costs. It keeps business and personal spending apart and makes record-keeping far easier.
- Choose MTD-compatible software and link your business bank account. We use FreeAgent (other providers are available), which has worked closely with HMRC to build its MTD features and meets the requirement to keep digital records.
- Connect your software to HMRC so it can send your updates.
- Keep your records up to date and send your quarterly updates by each deadline.
- Finish the year by adding any other income and submitting your end-of-year tax return.
I already pay tax under CIS. Do I still need MTD?
Yes. Even though tax is taken off your payments under the Construction Industry Scheme (unless you have gross payment status), you still need to send quarterly updates of your income and costs if you’re in MTD.
This matters if you usually file early to get a CIS tax refund. You can’t submit your end-of-year return until all four quarterly updates are in, so any refund waits until your MTD reporting is up to date. Keep your updates on track and your refund won’t be held up.
Are there penalties for missing MTD deadlines?
Yes. HMRC uses a penalty points system for late submissions:
- You get 1 point for each late quarterly update.
- At 4 points, you’re charged a £200 penalty, plus another £200 for each late submission after that.
- If you stay below 4 points, each point expires automatically 24 months after it was given.
Good news for the first year: if you joined MTD in April 2026, HMRC won’t give penalty points for late submission of your first four quarterly updates (due 7 August 2026, 7 November 2026, 7 February 2027 and 7 May 2027). This doesn’t cover your 2026/27 end-of-year return, due 31 January 2028, and late payment penalties still apply.
Do I need an accountant for MTD?
There's a lot to take in, and the deadlines come round quickly. A good accountant will have made it their business to understand the changes inside out, so you don't have to worry about missing something.
At Wolfpack Accounting, both our sole trader plans include MTD-ready software and we can handle your quarterly updates for you. Whether you're already in MTD or joining in 2027 or 2028, it's always worth a chat.
This guide is general information, not personal tax advice. Correct as at October 2026. MTD rules and thresholds can change.