Making Tax Digital for Income Tax – do you need to file?

HMRC are introducing a new regime called Making Tax Digital for Income Tax (MTDfIT) from April 2026. HMRC estimates that 864,000 people will need to file quarterly returns.
 

Quarterly reporting

If you’re a sole practitioner, have other self-employed income or personal income from property (UK and/or overseas) with a combined turnover of £50,000 or more, you’ll need to supply records to HMRC on a quarterly basis. However, you’ll still only need to pay your tax once or twice a year. From April 2027, the MTDfIT regime will be extended to include sole traders or landlords with a turnover of £30,000 or more but it is not yet known when partnerships will join MTDfIT.
 

What will change under MTDfIT?

Firstly, income records will need to be submitted quarterly instead of just once per year. The first quarterly report will be due on 7 August, with subsequent reports on 7 November, 7 February 2027, and 7 May 2027. These simplified reports only cover the specific income and related expenses, they are not a full tax return. You will need to send separate files for each type of income (ie, trading profits, UK rents and overseas rents.

After the end of the 2026/27 tax year, you will need to submit a final tax declaration by 31 January 2028 - this will replace your current annual self-assessment tax return. At this point any adjustments can be made to your records.

The second key change is that if you fall within MTDfIT quarterly reporting, you will only be allowed to submit your tax information to HMRC using a compatible package
 

Will you have to register or report?

If you were a sole trader or had private consulting income and/or rental income on your 2024-2025 self-assessment tax return (submitted by 31 January 2026) with total qualifying turnover of more than £50,000, HMRC should contact you by letter to confirm that you must start using MTDfIT from 6 April 2026.

If your combined turnover from property and/or self-employment is between £30,000 and £50,000, you will need to be ready to report from April 2027.

You can check if you qualify for MTDfIT through HMRC’s checker tool
 

Penalties for not complying?

These changes are mandatory and, if you are required to complete quarterly filings, you will no longer be able to file your tax return using the normal annual method.

HMRC will use a points system for those who don’t comply with the new regime. Once a certain number of points have been applied to your account, you’ll receive an automatic fine of £200. Points will be given for late payments as well as late submissions. Any points you accrue will be valid for two years before removal. If you receive a fine, HMRC requires a 12-month period of full compliance before the points are removed. There will also be a one-off fine for those who fail to use compatible software to file their returns.

We will be helping clients meet their MTD obligations as part of our broader private wealth services. We are also able to support individuals with their software needs to ensure compliance.  Please contact your local BDO office to discuss how we can help.