Significant changes are being implemented by HMRC as to how self-employed individuals and landlords report their income to HMRC, known as Making Tax Digital for Income Tax (MTD for IT). These changes will apply to residents and non-residents of the UK.
These changes will begin to take effect in stages commencing from 6 April 2026 and from 6th April 2027 for non-residents (assuming you file the SA109 Residency supplement on your UK tax return).
MTD for IT is part of the UK Governments aims to reduce the UK tax gap and promote better record keeping, whilst minimising errors and mistakes.
What is Making Tax Digital for Income Tax
MTD for IT is a new way for sole traders and landlords to report their income and expenses to HMRC.
From 6 April 2026, sole traders and landlords must use it, based on their total annual income from self-employment and property (gross income before expenses).
When you need to start using MTD for IT depends on you qualifying within a tax year.
Instead of filing one annual Self-Assessment UK tax return, you will need to:
- Keep records of income and expenses digitally.
- Send HMRC quarterly updates of your income and expenses through compatible software.
- Submit a year end declaration to HMRC.
The quarterly reporting will provide a better overview of what HMRC can expect to receive across the tax year, as opposed to receiving the tax after nine months following the end of the tax year. For the taxpayer, they would benefit from obtaining a better estimate of their UK tax liability and assist with their financial position.
Key dates and thresholds
| Start date | Who it applies to | Relevant tax year? |
| 6 April 2026 | Self-employed and landlords with qualifying income of greater than GBP£50,000 | 2024/25 tax return |
| 6 April 2027 | Self-employed and landlords with qualifying income of greater than GBP£30,000 (including SA109 filers) | 2025/26 tax return |
| 6 April 2028 | Self-employed and landlords with qualifying income of greater than GBP£20,000 | 2026/27 tax return |
Qualifying income is the total income you earn in a tax year from self-employment and property. Your total income can arise from more than one source of self-employment or property income.
All other sources of income that are reported through your annual Self-Assessment tax return do not count towards qualifying income for MTD purposes, for example:
- Pay As You Earn employment income
- Partnership or dividends (including those from your own company)
- State Pension
- Private pensions
Quarterly return periods and deadlines
Quarterly returns will need to be submitted through approved software by the following dates.
| Quarter | Period covered | Submission deadline |
| Q1 | 6 April – 5 July | 7 August |
| Q2 | 6 July – 5 October | 7 November |
| Q3 | 6 October – 5 January | 7 February |
| Q4 | 6 January – 5 April | 7 May |
Important news for our international based clients
If you live abroad or have foreign income and file the SA109 supplementary pages (Residence, remittance basis etc.) as part of your UK Self-Assessment tax return, you will automatically be deferred from MTD for IT requirements until April 2027.
Even if your qualifying income exceeds £50,000 (which would normally require MTD from April 2026), the SA109 deferral means you will not need to start using MTD for Income Tax until 6 April 2027 at the earliest.
HMRC require additional time to incorporate the new Foreign Income and Gains regime and other reforms affecting internationally mobile individuals into the MTD system. This one-year delay allows HMRC to develop the necessary functionality.
For those clients who have an extra year before MTD becomes mandatory, we still recommend to:
- Start digitising your record-keeping
- Reviewing software options
- Preparing for quarterly reporting that will be required from April 2027
Penalties under MTD
Late submission penalties
HMRC is moving to a points-based system for late submissions:
| Event | What happens |
| Each missed quarterly or annual submission | 1 penalty point |
| When you reach 4 points | £200 fixed penalty |
| Every further late submission after 4 points | Another £200 penalty each time |
Points can be reset if you achieve a period of compliance and submissions have been made on time.
Late payment penalties
For late tax payments, financial penalties build over time:
| How late is the payment? | Penalty applied |
| More than 15 days late | 3% of the unpaid tax |
| More than 30 days late | Further 3% |
| More than 31 days late | An additional 3% of the tax outstanding on the 30th day.
An additional 10% p.a. charge will apply until the payment is made. |
In addition to the above late payment interest will apply.
If you join MTD voluntarily before you are required to, there are no penalties for late quarterly submissions during the testing phase.
What you will need to do quarterly
Once you are within MTD, every three months you will:
- Report your income
- Report your expenses
- Submit your update within one month of the end of the quarter
The quarterly timetable and deadlines are in the table above, so it is worth building those dates into your calendar and cash flow planning.
Should you start early?
You can sign up voluntarily now. Some reasons to consider early adoption:
Pros:
- No quarterly penalties during the testing phase
- Access to HMRC support while you are learning the system
- Time to choose and get used to your software
- Problems can be identified and fixed early
- Some simple cases can use free software
Cons:
- Extra admin before you are legally required to join
- You may need to start paying for software earlier
Exemptions
You may be able to claim an exemption if:
- You genuinely cannot use digital services due to age, disability or location
- Your religious beliefs prevent using online services
- You are otherwise genuinely digitally excluded
Simply being busy or not liking technology will not be enough.
How GM Tax can help
At GM Tax, the focus is on helping both UK residents and international clients adapt with as little disruption as possible. How can we assist you:
- Confirm exactly when you come into MTD and what that means for you
- Take care of quarterly updates and the annual submission
- Help you stay compliant and avoid penalties
Please note that the rules and dates are correct at the time of writing and may change, given the history of MTD deferrals and upcoming UK Budget announcements.
