Making Tax Digital for Self-Employed People: UK Rules, Thresholds and Deadlines for 2026–2028

Making Tax Digital for self-employed people is now mandatory for the first group of UK sole traders. From 6 April 2026, sole traders and landlords with qualifying income of more than £50,000 are required to use Making Tax Digital for Income Tax.

The threshold will fall to more than £30,000 from 6 April 2027 and more than £20,000 from 6 April 2028. Qualifying income is based on gross income from self-employment and property before business expenses are deducted, rather than taxable profit.

For people within the rules, Making Tax Digital changes how business records are maintained and how information is sent to HM Revenue & Customs (HMRC).

They must keep digital records, use compatible software, provide quarterly updates and submit their annual tax return through compatible software.

What Is Making Tax Digital for Self-Employed People?

Making Tax Digital for Income Tax is a system designed to move parts of Self Assessment towards digital record keeping and more frequent reporting.

It applies principally to qualifying sole traders and landlords rather than every person who submits a Self Assessment tax return.

Under the system, affected taxpayers must maintain digital records of relevant business income and expenses. Compatible software then uses these records to prepare summaries that are sent to HMRC during the tax year.

The main requirements include:

• Keeping Digital Records Of self-employment or property income and relevant expenses
• Using Compatible Software That can meet HMRC’s Making Tax Digital requirements
• Sending Quarterly Updates Based on information held in the digital records
• Reviewing The Year’s Information Before completing the annual tax return
• Submitting The Tax Return Through compatible software by the applicable deadline

Making Tax Digital does not mean that a sole trader has four separate annual tax returns. Quarterly updates and the annual tax return perform different functions.

How Making Tax Digital Changes Self Assessment?

Traditional Self Assessment has often allowed a business owner to bring together records after the tax year has ended before completing the return.

Making Tax Digital introduces a more continuous process.

Affected self-employed people need to maintain appropriate digital records during the year and provide information to HMRC every quarter. The annual tax return remains necessary and is used to finalise the individual’s overall tax position.

The quarterly updates are based on business records and provide summaries of income and expenses. They do not normally require every tax adjustment or relief to be calculated at that stage.

The final tax return is where the taxpayer reviews the year’s information and deals with other relevant income, allowances, reliefs and adjustments.

Who Must Use Making Tax Digital If Self-Employed?

Not every self-employed person needs to use MTD for Income Tax immediately.

Whether the rules apply depends primarily on the person’s qualifying income and the tax year being considered.

A sole trader generally comes within mandatory Making Tax Digital where the individual is registered for Self Assessment, receives qualifying self-employment or property income and exceeds the applicable income threshold.

The rollout is being phased in over three tax years.

Making Tax Digital Income Thresholds For 2026, 2027 And 2028

The thresholds are important because many people searching for Making Tax Digital self-employed requirements may assume that the £50,000 figure permanently determines who must comply.

It does not.

The mandatory threshold reduces over the following two years, meaning substantially more sole traders and landlords could come within Making Tax Digital by April 2028.

Self-employed people currently below £50,000 should therefore check their qualifying income rather than assume the new system will not affect them.

What Counts As Qualifying Income For MTD?

Qualifying income is broadly the gross income received from self-employment and property before expenses and tax.

This distinction matters because gross income can be considerably higher than taxable profit.

Suppose a sole trader generates £58,000 in business income and has £22,000 of allowable business expenses. The resulting business profit may be much lower than £50,000, but the gross qualifying income can still place the individual within the Making Tax Digital threshold.

Where someone receives both self-employment and property income, the relevant amounts are generally considered together when working out qualifying income.

Is The MTD Threshold Based On Turnover Or Profit?

The Making Tax Digital threshold is based on qualifying gross income rather than the taxable profit remaining after business expenses have been deducted.

For a sole trader, gross business income will commonly be understood as turnover.

This is an important difference for businesses with relatively high turnover but substantial operating expenses.

A person should therefore avoid checking only the profit figure shown in the accounts when deciding whether Making Tax Digital applies.

What Happens If Someone Has Self-Employment And Property Income?

A person may fall within Making Tax Digital even when neither individual income source exceeds the threshold on its own.

For example, a sole trader earning £34,000 from self-employment and receiving £19,000 in qualifying property income could have combined qualifying income of £53,000.

Both relevant income sources therefore need to be considered when checking whether the mandatory threshold has been crossed.

Making Tax Digital Self-Employed Deadlines

There are two types of dates self-employed people need to understand: the date they are required to enter Making Tax Digital and the quarterly submission deadlines that apply once they are within the system.

The mandatory start dates are:

• 6 April 2026 for qualifying income above £50,000
• 6 April 2027 for qualifying income above £30,000
• 6 April 2028: For qualifying income above £20,000

Once a taxpayer is required to use MTD for Income Tax, quarterly reporting becomes part of the normal compliance cycle.

What Are The Quarterly MTD Deadlines?

The standard quarterly update deadlines are:

• 7 August: For the first update
• 7 November: For the second update
• 7 February: For the third update
• 7 May for the fourth update

A significant feature of the current system is that quarterly updates are cumulative.

For standard update periods, the first update covers information from the beginning of the tax year to the end of the first period. The second incorporates information from the beginning of the tax year through the second period, and the process continues throughout the year.

What Must Self-Employed People Do Under Making Tax Digital?

The practical requirements extend beyond submitting information four times each year.

Self-employed people within MTD need a record-keeping process that allows the required information to remain digital and flow into compatible software.

Keep Digital Records

Relevant income and expenses need to be recorded digitally.

For a sole trader, this can include information about sales or other business income together with the expense categories required for the business.

Digital record keeping does not remove the need to retain supporting business documents where existing tax rules require them.

Accurate records also remain important because Making Tax Digital changes the method used to maintain and submit information rather than changing the underlying responsibility to report income correctly.

Use MTD-Compatible Software

Anyone required to use Making Tax Digital for Income Tax needs software capable of meeting the relevant HMRC requirements.

Depending on the business, this could involve a complete accounting package or a combination of compatible applications.

Software should be able to support the essential MTD process, including maintaining or receiving digital records, creating quarterly updates and supporting the annual submission.

The most suitable system will vary according to the complexity of the business.

A small sole trader with relatively few transactions may have different requirements from a business with several income streams, employees or more complex accounting records.

Send Quarterly Updates To HMRC

Compatible software uses the digital records to create summaries of self-employment or property income and expenses.

These updates are sent every three months.

Quarterly reporting should not be confused with calculating a completely final tax liability four times a year. Taxpayers generally do not need to make all year-end accounting and tax adjustments before each quarterly update.

The quarterly process is primarily designed to report information accumulated in the digital records.

Complete The Annual Tax Return

Making Tax Digital does not remove the annual tax return.

At the end of the tax year, the individual needs to review the information recorded during the year and provide any other details required for the final tax calculation.

That can include income outside the business, adjustments, allowances, reliefs and other information relevant to Self Assessment.

For people who entered mandatory MTD on 6 April 2026, their first annual return under the new system covers the 2026/27 tax year and is due by 31 January 2028.

Does A Self-Employed Person Need Accounting Software For MTD?

Compatible software is a core requirement of Making Tax Digital for Income Tax.

However, that does not mean every self-employed person needs the same type of accounting platform.

Some sole traders may choose a complete bookkeeping and accounting system that handles records, quarterly reporting and the annual return in one place. Others may operate with more than one digitally connected product.

Before selecting software, a business should consider:

• HMRC Compatibility: To ensure the system supports MTD for Income Tax
• Business Requirements: Including the number and type of transactions handled
• Income Sources: Particularly where property and self-employment records both need managing
• Agent Access: If an accountant or bookkeeper will work with the records
• Annual Filing Features: To understand what the product can handle at year-end
• Cost: Including subscription charges and additional features
• Ease of Use: Particularly for businesses moving from paper-based records

Software should be selected according to actual business requirements rather than simply because a product is marketed as an accounting solution.

Can Spreadsheets Be Used For Making Tax Digital?

A spreadsheet may form part of an MTD record-keeping setup, but a spreadsheet by itself cannot necessarily perform all the functions needed to comply with Making Tax Digital.

Some businesses use bridging software to connect existing spreadsheet records to the MTD system.

The important issue is whether the complete setup meets the digital record and submission requirements.

A business that wants to continue using spreadsheets should therefore check how its chosen software connects the records and handles quarterly and annual reporting before relying on the arrangement.

Can An Accountant Handle Making Tax Digital For A Self-Employed Person?

An accountant or authorised tax agent can manage many Making Tax Digital tasks for a sole trader.

The exact division of responsibilities depends on the service agreed between the individual and the accountant.

An agent may help with:

• Setting Up Software And reviewing the bookkeeping system
• Maintaining Digital Records Where bookkeeping forms part of the service
• Checking Business Transactions Before information is submitted
• Preparing Quarterly Updates Using the client’s digital records
• Making Year-End Adjustments Where necessary
• Submitting The Annual Tax Return On behalf of the client

Using an accountant does not remove the taxpayer’s responsibility to provide complete and accurate information.

Businesses should also establish who is responsible for entering transactions and how frequently records need to be supplied. Waiting until the end of the year to provide information may no longer fit comfortably with a quarterly reporting cycle.

Making Tax Digital Exemptions

Some people may be exempt from MTD for Income Tax.

HMRC distinguishes between certain automatic exemptions and circumstances where an individual needs to apply.

Digital exclusion is one important area. Depending on the person’s circumstances, HMRC may consider whether factors such as age, disability, health, location or religious beliefs make it unreasonable for that person to use the required digital system.

Being uncomfortable with accounting software does not by itself mean an exemption automatically applies.

Individuals who think an exemption may be relevant should check the eligibility criteria and application requirements in HMRC’s Making Tax Digital exemption guidance. A person who is exempt from MTD must still report relevant income and gains through Self Assessment.

What Happens If Self-Employed Income Falls Below The MTD Threshold?

A sole trader who has entered Making Tax Digital should not assume that one lower-income year automatically removes the requirement.

The rules for leaving MTD are different from simply checking the initial entry threshold.

This matters particularly for businesses with fluctuating turnover.

A sole trader might have a strong year that takes qualifying income above the relevant threshold, followed by a quieter year. That change does not necessarily mean quarterly reporting can immediately stop.

Before leaving the system, the taxpayer should confirm that the conditions for opting out have actually been met.

Stopping digital records or quarterly submissions too early could create unnecessary compliance problems later.

Making Tax Digital Penalties And Missed Deadlines

The introduction of Making Tax Digital for Income Tax also brings changes to the late-submission penalty framework.

There is an important transitional position for the first mandatory year.

HMRC says it will not apply penalty points for late quarterly updates during the 2026/27 tax year. However, taxpayers still need to complete the outstanding quarterly updates before they can submit their annual tax return.

This first-year treatment does not mean quarterly reporting is optional.

From later tax years, missing a quarterly update deadline can result in a penalty point. For taxpayers required to use MTD, the late-submission threshold is four points. Reaching that threshold can trigger a £200 financial penalty, with further penalties possible for additional missed submission deadlines while the taxpayer remains at the threshold.

Late tax returns and late tax payments also need to be considered separately. A temporary easement for quarterly updates should therefore not be interpreted as a general exemption from filing or payment penalties.

How Self-Employed People Can Prepare For Making Tax Digital?

Preparation should start with checking the numbers rather than immediately purchasing software.

A practical MTD preparation process can include:

• Calculate Qualifying Income Using gross self-employment and relevant property income
• Identify The Start Date Based on the £50,000, £30,000 or £20,000 threshold
• Review Existing Records To establish whether bookkeeping is already digital
• Choose Suitable Software Based on the business’s actual reporting needs
• Move Records Into A Sustainable Process Rather than waiting for the first quarterly deadline
• Check Quarterly Dates And add them to the business accounting calendar
• Agree Responsibilities With An Accountant If an agent will manage part of the process
• Review Multiple Income Sources Where both property and self-employment income are involved
• Keep Records Current So quarterly submissions are not prepared from a backlog
• Check Eligibility Again After Major Changes Such as closing a business or changing income sources

Businesses due to enter MTD in April 2027 or April 2028 have additional preparation time, but leaving software and record-keeping changes until the final weeks could make the transition more difficult.

Making Tax Digital Self-Employed Checklist

A sole trader preparing for Making Tax Digital should be able to answer the following points:

• Qualifying Income Checked
• Mandatory Start Date Confirmed
• Property Income Included Where Relevant
• Compatible Software Selected
• Digital Record-Keeping Process Established
• Quarterly Deadlines Added To The Calendar
• Responsibilities Agreed With Any Accountant Or Agent
• Annual Tax Return Requirements Understood
• Possible Exemption Checked Where Relevant
• Business Changes Monitored Throughout The Year

The checklist is particularly useful for businesses close to one of the thresholds because eligibility can change as MTD is extended to lower levels of qualifying income.

Conclusion: What Making Tax Digital Means For The Self-Employed?

Making Tax Digital for self-employed people represents a major change in how many UK sole traders maintain records and provide Income Tax information to HMRC.

From April 2026, the first mandatory group includes qualifying sole traders and landlords with gross qualifying income above £50,000. The threshold falls to more than £30,000 from April 2027 and more than £20,000 from April 2028.

The most important distinction is that the threshold is not based simply on taxable profit. Gross qualifying self-employment and property income can determine when a person has to enter MTD.

Once within the system, affected taxpayers need to maintain digital records, use compatible software, submit quarterly updates and complete their annual tax return.

For people searching for making tax digital self employed requirements before their mandatory start date, checking qualifying income early is the sensible first step. It provides time to select appropriate software, adjust record-keeping practices and decide whether professional accounting support will be needed.

Frequently Asked Questions

Is Making Tax Digital Compulsory For Self-Employed People?

It is compulsory for sole traders who meet the qualifying conditions and exceed the applicable income threshold, unless an exemption applies. The system is being introduced progressively between April 2026 and April 2028.

What Is The Making Tax Digital Threshold In 2026?

For the first mandatory phase beginning on 6 April 2026, the threshold is qualifying income of more than £50,000. The relevant qualifying income is taken from the 2024/25 tax year.

What Is The Making Tax Digital Threshold In 2027?

From 6 April 2027, qualifying sole traders and landlords with income above £30,000 will need to use MTD for Income Tax. Eligibility for that phase is based on qualifying income for 2025/26.

Is The MTD Threshold Based On Turnover Or Profit?

It is based on gross qualifying income before expenses rather than taxable profit. For a sole trader, the relevant business figure is therefore closer to gross turnover than the profit left after expenses.

Do Self-Employed People Have To Submit Four Tax Returns A Year?

No. Quarterly MTD updates are summaries of information from digital business records. They are not four separate annual tax returns. An annual tax return is still required.

Does A Sole Trader Still Submit A Self Assessment Tax Return Under MTD?

Yes. Making Tax Digital changes the process used to maintain records and report information during the year, but an annual tax return remains part of the system.

What Happens If Someone Has Self-Employment And Rental Income?

Relevant gross self-employment and property income generally need to be considered together when calculating qualifying income. This can result in a person exceeding the MTD threshold even when each income source is below it individually.

Can An Accountant Manage Making Tax Digital?

Yes. An authorised accountant or tax agent can manage many MTD tasks for a client. The taxpayer will still need to provide accurate records and information so the agent can complete the required work.

Can Spreadsheets Be Used For Making Tax Digital?

A spreadsheet can potentially form part of the digital record-keeping process when used with suitable compatible or bridging software. Businesses should check that the overall setup meets MTD requirements rather than assuming a spreadsheet alone is sufficient.

What Happens If A Quarterly MTD Deadline Is Missed?

HMRC is not applying penalty points for late quarterly updates in the 2026/27 tax year, although the outstanding updates still have to be completed before the annual tax return can be submitted. From subsequent tax years, late quarterly submissions can generate penalty points under the MTD penalty system.