UK COMPANY ACCOUNTS FILING
MTD (Making Tax Digital) for Income Tax is HMRC’s digital reporting system that requires sole traders and landlords above qualifying income thresholds to keep digital records and submit quarterly updates of income and expenses through compatible software. The legal basis is the Income Tax (Digital Requirements) Regulations 2021, with phased mandation under the Finance Act 2017.
The first phase went live on 6 April 2026 for individuals with combined gross income above £50,000 from self-employment and UK property, with two further phases lowering the threshold to £30,000 in 2027 and £20,000 in 2028.
Every business and rental transaction recorded in HMRC-recognised software, with bank feeds or manual entry replacing paper ledgers and standalone spreadsheets
Summary submissions of income and expenses sent to HMRC every three months through compatible software
Final declaration
The yearly self assessment filing that confirms total income, claims allowances and ascertains the final tax bill.
Sole traders with combined gross income above £50,000 from self-employment and UK property in the 2024/25 tax year are mandated into MTD from 6 April 2026. The threshold applies to gross income before expenses, not profit. A sole trader with £45,000 in trading income and £10,000 in rental income has qualifying income of £55,000 and falls within Phase 1.
Sole traders below the £50,000 threshold continue under Self Assessment until the threshold drops to £30,000 in April 2027 and £20,000 in April 2028.
MTD for Income Tax applies in three phases between April 2026 and April 2028, with thresholds dropping each year. Phase 1 is now live. The phase a taxpayer enters depends on the qualifying income reported in the relevant prior tax year.
| Phase | Start date | Income threshold | Based on tax year |
|---|---|---|---|
| Phase 1 | 6 April 2026 (live) | Above £50,000 | 2024/25 |
| Phase 2 | 6 April 2027 | Above £30,000 | 2025/26 |
| Phase 3 | 6 April 2028 | Above £20,000 | 2026/27 |
Once a taxpayer enters MTD, they remain within the regime even if income drops below the threshold in later years. There is no opt-out mechanism.
For the first phase, quarterly update deadlines for the 2026/27 tax year are fixed:
| Quarter | Period covered | Submission deadline |
|---|---|---|
| Q1 | 6 April – 5 July 2026 | 7 August 2026 |
| Q2 | 6 July – 5 October 2026 | 7 November 2026 |
| Q3 | 6 October 2026 – 5 January 2027 | 7 February 2027 |
| Q4 | 6 January – 5 April 2027 | 7 May 2027 |
| Final declaration | Full 2026/27 tax year | 31 January 2028 |
Calendar quarters (1 April – 30 June, etc.) can be elected within the software before the first update is filed. The 7th-of-the-month deadlines remain unchanged under calendar quarter elections.
The 2025/26 self assessment tax return is still filed by 31 January 2027 under the existing system, since 2025/26 ended before MTD mandation.
MTD for Income Tax runs as a continuous cycle throughout the tax year. The three steps below cover how records are maintained, how quarterly updates are submitted, and how the year-end final declaration closes the cycle.
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Registration for MTD for Income Tax is done through the HMRC online service using your Government Gateway account. HMRC does not auto-enrol taxpayers as registration is the individual’s responsibility, and missing the registration step does not exempt you from the filing obligation.
Check your 2024/25 self assessment return for combined gross income from self-employment and UK property. If the combined figure exceeds £50,000, MTD applies from 6 April 2026.
Select software from HMRC’s recognised list. Set up your account, connect your business bank feed where available, and confirm the software supports MTD for Income Tax (not only MTD for VAT).
Sign in to your Government Gateway account and complete the MTD for Income Tax sign-up form. You will need your National Insurance number, UTR, and details of your income sources.
If using an accountant, authorise them to file on your behalf through HMRC’s Agent Services Account system. Authorisation is required before the agent can submit updates or the final declaration on your behalf.
Record every business and rental transaction in the software from the start of the relevant tax year. Records cannot be back-built from paper receipts after a quarter ends if they were not maintained digitally during the quarter.
MTD penalties operate on a points-based system for late submissions, with a £200 financial penalty triggered at four points. A 12-month soft landing applies to Phase 1 taxpayers for the 2026/27 tax year only; late quarterly updates during this period do not generate penalty points.
Each late quarterly update adds 1 penalty point to your record. A £200 penalty is triggered once you reach 4 points. Points below the 4-point threshold expire automatically 24 months after the missed deadline. Once you reach the 4-point threshold, automatic expiry stops. To reset, you must file all quarterly updates and your final declaration on time for 12 consecutive months and clear all outstanding submissions from the previous 24 months.
HMRC has confirmed that no penalty points will be issued for late quarterly updates during the 2026/27 tax year. The soft landing applies to Phase 1 taxpayers only and covers quarterly updates only. Late filing of the final declaration on 31 January 2028 is not covered and remains penalty-eligible.
Late payment penalties remain in force throughout the soft-landing period. Tax payments are still due by 31 January (balancing payment) and 31 July (second payment on account).
For 2026/27 only, no late payment penalty applies for the first 30 days after the due date. From day 31, a charge of 10% per year applies daily on the outstanding amount until paid. From 2027/28, the grace period shortens to 15 days: a 3% penalty applies at day 15, a further 3% at day 30, then 10% per year from day 31. Both percentage rates increase to 4% from April 2027. Interest accrues separately from the due date at the Bank of England base rate plus 2.5 percentage points and cannot be appealed.
MicroFiler’s MTD for Income Tax service covers the full annual cycle that includes software setup, four quarterly updates, and the year-end final declaration.
| Services | Cost |
|---|---|
| One-off setup | £199 |
| Ongoing filing | From £25/month |
The setup fee covers software selection, HMRC agent authorisation, bank feed configuration, and the initial digital record-keeping framework for your business or properties.
What’s included each year
MTD for Income Tax is now live for the first phase of sole traders and landlords, with quarterly deadlines starting 7 August 2026 and the soft-landing period ending on 5 April 2027. From April 2027, the £30,000 threshold brings hundreds of thousands more taxpayers into scope.
No. Quarterly updates are informational only, they report income and expenses, not tax due. Tax payment dates remain on the existing self assessment timetable: 31 January for balancing payment and the first payment on account, 31 July for the second payment on account.
Yes, with bridging software. A spreadsheet alone is not MTD-compliant, but a spreadsheet connected to HMRC through approved bridging software meets the digital record-keeping requirement. Bridging software typically costs £1–£10 per month.
The Self Assessment tax return is replaced by the MTD final declaration for sources within MTD. Other income such as employment, dividends, savings interest are reported on the final declaration, which acts as the equivalent of the SA100 for MTD taxpayers.
You file a separate update for each business or income source, not each property. All UK rental income is treated as one property business, so a landlord with five properties files one quarterly update covering all five. Furnished holiday lets follow standard property treatment from April 2025 onward.
Five categories of taxpayer fall outside MTD for Income Tax:
Partnerships and LLPs are not yet within MTD for Income Tax, though individual partners with qualifying income from sole trading or property in their own right are caught.
You remain within MTD. Once a taxpayer enters the regime in any phase, there is no opt-out mechanism for falling below the threshold in later years. Continued filing is required.
Yes. HMRC’s voluntary sign-up has been open since 2024. Voluntary participants do not face quarterly update penalty points during the testing period and gain familiarity with the software before mandation.
No. Limited companies file annual accounts and a CT600 corporation tax return, both of which sit outside MTD for Income Tax. Company accounts and tax filing operate under the existing corporation tax rules.
MTD for Income Tax applies to sole traders and landlords reporting business and rental income to HMRC, whereas MTD for VAT applies to VAT-registered businesses reporting VAT returns. Both regimes require digital records and software-based submissions, but they cover different taxes and have separate registration, deadlines, and penalty regimes.
Most setups complete within 3-5 working days from instruction, including software selection, HMRC agent authorisation, and bank feed configuration. Faster turnaround is possible for simpler cases such as landlords with a single property.
Yes. Mid-year switching is straightforward, your previous accountant transfers the existing digital records, we resume from the next quarterly update, and the £199 setup fee is pro-rated to reflect the partial year.
For Phase 1 taxpayers, no penalty point is issued during the 2026/27 soft landing. The update should still be filed as soon as possible, because outstanding quarterly updates must be submitted before the final declaration is accepted.
