MTD for Income Tax: What Changed in April 2026 and What You Need to Do

The Annual Tax Return as You Knew It Is Gone

If you are self-employed or a landlord in the UK with qualifying income above £50,000, April 2026 marks a turning point. Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is now live. The single, annual Self Assessment tax return has been replaced by a regime of quarterly digital updates and a year-end Final Declaration, all submitted through compatible software.

Around 795,000 sole traders and landlords fall into this first wave. If you are one of them, the old routine of pulling together a year’s worth of receipts every January is over. HMRC now expects to see summarised income and expenses four times a year, submitted digitally, with records kept in software that meets their requirements.

Here is what changed, who is affected, and what you need to do.

What Changed on 6 April 2026

From 6 April 2026, anyone with combined gross self-employment and property income above £50,000 must keep digital records and file quarterly updates with HMRC using MTD-compatible software. This is Phase 1 of the rollout.

The key shift is from annual to quarterly reporting. Instead of one Self Assessment return covering the entire tax year, you now submit four summaries of income and expenses during the year, followed by a Final Declaration after the year ends. The Final Declaration replaces the Self Assessment return for mandated taxpayers.

It is your gross income that determines whether you are in scope, not your profit. That means total income before deducting any expenses, and it combines self-employment and property income together.

The qualifying income is based on your prior tax year. For the April 2026 mandate, HMRC looks at your 2024/25 tax year figures. If your combined gross self-employment and property income exceeded £50,000 in that year, you are in.

The Income Threshold: £50,000 Now, Lower Later

The £50,000 threshold is just the beginning. HMRC has confirmed a phased rollout:

• April 2026 (Phase 1): Qualifying income above £50,000 — approximately 795,000 people
• April 2027 (Phase 2): Qualifying income above £30,000
• April 2028 (Phase 3): Qualifying income above £20,000 — announced, though not yet legislated with the same certainty as Phases 1 and 2

“Qualifying income” means the combined gross income from self-employment and property. If you earn £35,000 from freelancing and £20,000 from a rental property, your qualifying income is £55,000 and you are in scope now.

Partnerships are currently excluded from MTD ITSA. Individual partners may still be caught by the threshold through their other self-employment or property income.

Quarterly Updates: What You Submit and When

You must submit four quarterly updates to HMRC each tax year. Each update is a summary of your income and expenses for that quarter. These are not mini tax returns and they are not full tax calculations. Think of them as periodic check-ins: total sales, total costs, broken down by category.

Here are the deadlines:

Each update covers income and expenses for the quarter, categorised according to HMRC’s requirements. Your software submits them via HMRC’s API. You cannot submit quarterly updates through the HMRC online portal.

You must keep digital records throughout the year. That means your income and expense transactions need to live in software, not in a shoebox. The records must include the amount, date, and category for each transaction. If you have multiple income sources (say, two rental properties and a freelance business), you submit separate updates for each source.

A critical detail: during the 2026/27 tax year (the first year), HMRC is applying a soft landing. Penalty points for late quarterly updates are waived. This gives you breathing room to get your processes right, but do not treat it as optional. The soft landing does not extend to the Final Declaration or to late payment penalties.

The Final Declaration: Your New Year-End Filing

The Final Declaration replaces the Self Assessment tax return for taxpayers mandated into MTD ITSA. It is due by 31 January following the end of the tax year. For the 2026/27 tax year, that means 31 January 2028.

The Final Declaration is where you bring everything together. It covers all your income sources, not just self-employment and property. That includes employment income, dividends, interest, capital gains, and anything else. It pre-populates from your quarterly updates, so much of the work is already done by the time you get there.

If you have been following the MTD ITSA developments over the years, you may remember the End of Period Statement (EOPS). It has been permanently abolished. Its functions have been absorbed into the Final Declaration, simplifying the process.

Unlike the quarterly updates, the Final Declaration has no soft landing. Late filing penalties apply from the start, just as they did with Self Assessment.

Software You Need

MTD ITSA cannot be done on paper or through the HMRC portal. You must use HMRC-recognised MTD-compatible software that connects to HMRC’s systems via their API.

Your software must maintain digital records and submit quarterly updates and the Final Declaration directly to HMRC. There must be digital links between the different parts of your record-keeping. That means if data moves from one system to another, it must flow digitally. Manual re-keying of figures from one tool into another breaks the digital link requirement.

If you prefer spreadsheets, you are not entirely out of luck. Bridging software is permitted. You can keep your records in a spreadsheet and use a separate piece of bridging software to pull that data and submit it to HMRC. The link between the spreadsheet and the bridging software must be digital (copy-paste counts, but re-typing does not).

HMRC maintains a list of compatible software on GOV.UK. Before committing to any tool, verify it appears on that list.

The Penalty Regime: Points, Thresholds and Fines

MTD ITSA uses a points-based penalty system for late submissions. It works like penalty points on a driving licence: accumulate enough and you face financial consequences.

Late submission penalties

Points expire after a period of sustained compliance. To reset your points tally, you must meet all filing obligations on time for a continuous period (typically 24 months for quarterly filers). Once reset, your slate is clean.

Late payment penalties

Late payment operates on a separate track:

• After 15 days overdue: first late payment penalty (calculated on the outstanding amount)
• After 30 days overdue: additional penalty accrues daily

In the first year (2026/27), HMRC is allowing a 30-day grace period before late payment penalties kick in, rather than the standard 15 days.

The 2026/27 soft landing, summarised

• Penalty points for late quarterly updates: waived in the first year
• Late payment penalties: 30-day grace instead of 15 days in the first year
• Penalties for late Final Declaration: apply normally, no soft landing

The message is clear: use the first year to get your systems working, but do not miss the Final Declaration or fall behind on payments.

Landlords: Yes, You Are in Scope

Property income counts towards the qualifying income threshold. If you earn rental income from UK property and your combined gross self-employment and property income exceeds £50,000, you are mandated into MTD ITSA.

This catches many landlords who may have assumed MTD only affects the traditionally self-employed. Whether you have one buy-to-let or a portfolio, the obligation is the same. Each property income source requires separate quarterly updates.

If your only income is from employment and a single rental property generating £55,000 gross, you are in scope. The employment income does not count towards the threshold, but the property income alone puts you over the line.

Exemptions: Who Can Opt Out

HMRC recognises that digital-only filing does not work for everyone. You can apply for exemption on the grounds of:

• Digital exclusion: age, disability, remoteness, or lack of reliable internet access that makes digital compliance not reasonably practicable
• Religious beliefs that are incompatible with using digital tools

Exemptions are not automatic. You must apply to HMRC and demonstrate why you qualify. The bar is genuine inability, not preference.

One important caveat: if you have a tax agent who can file digitally on your behalf, HMRC will generally not grant an exemption. The reasoning is that you can delegate the digital obligation to your agent.

Entities outside the scope of MTD ITSA include companies (already under Corporation Tax), partnerships (deferred), and trustees.

How Odiverse Helps UK Businesses

Odiverse is building multi-country compliance tools for small businesses, including support for UK tax obligations. Our platform already handles digital record-keeping, automated categorisation, and financial reporting across multiple jurisdictions.

For the UK specifically, we currently support VAT tracking and reporting and are developing MTD for VAT submission capabilities. MTD ITSA integration is in development. We are working towards HMRC-recognised compatibility so that Odiverse users can submit quarterly updates and the Final Declaration directly from the platform.

In the meantime, Odiverse helps you maintain the digital records that MTD ITSA requires: categorised income and expenses, proper bookkeeping practices, and reporting that maps to HMRC’s requirements. When you choose accounting software, having a platform that grows with the regulatory landscape matters.

If you want to understand the broader MTD framework, including VAT obligations, our Making Tax Digital guide covers the full picture.

Get Ready Now

The first quarterly deadline is 7 August 2026. That gives you a few months to get your digital records in order, choose compatible software, and establish your quarterly workflow.

Do not wait until August. Start keeping digital records today, even if you plan to use bridging software. The earlier you build the habit, the smoother the transition.

Explore Odiverse for UK businesses and see how we can help you stay compliant as the rules evolve.