Making Tax Digital for Income Tax: what sole traders actually need to do

The short answer: In 2026/27, Making Tax Digital for Income Tax covers sole traders and landlords with qualifying income over £50,000. Over £30,000 joins on 6 April 2027, and over £20,000 on 6 April 2028. You send quarterly updates through software. Your tax is still paid on the usual Self Assessment dates, and that won't change before April 2029.

Making Tax Digital sounds like a new tax. It isn't. It's a change to how certain sole traders and landlords keep records and report income.

If it applies to you, the job is to keep digital records, send updates through compatible software and complete your end-of-year tax return. Quarterly updates don't replace that final return.

When do I need to start Making Tax Digital for Income Tax?

It depends on your qualifying income in an earlier tax year. Here's HMRC's timetable:

Qualifying income means your total income from self-employment and property, before expenses. HMRC calls that turnover. Your PAYE salary doesn't count, and nor do dividends or pensions (HMRC: work out your qualifying income).

So someone with £55,000 of turnover and £20,000 of expenses can be in scope (meaning the rules apply to them), even though their profit is £35,000. The test is "more than", not "at least". If you have two sources, add them up. HMRC's own example is £25,000 of rent plus £27,000 from self-employment, which makes £52,000.

HMRC checks your tax return each year and writes to you if you're over the line. But if no letter arrives, it's still your responsibility to check and sign up. If you're in the over-£30,000 group, our guide to what to do before April 2027 walks through the next few months.

Tax treatment depends on the individual circumstances of each client and may be subject to change in future.

What do I have to do during the year?

You keep digital records and send HMRC a summary every 3 months, for each self-employment and property business. Then you file your tax return as normal.

Some things worth knowing about quarterly updates:

• They're summaries, not tax returns. HMRC gets totals for each income and expense category, not your receipts or invoices.

• Each one covers the tax year so far, from 6 April. If you spot a mistake, you fix it in your records and it flows into the next update.

• You still send one if nothing happened that quarter.

• Afterwards, you can see an estimate of your tax bill so far in your software and your HMRC online account.

The deadlines are 7 August, 7 November, 7 February and 7 May. The tax return and any balancing payment (the rest of the tax you owe for the year) are due by 31 January after the tax year ends (HMRC: deadlines and penalties). For 2026/27, that's 31 January 2028. The sole trader tax planner puts these dates in one place.

Can a spreadsheet do the job? It can be part of your setup. On its own, it can't send anything to HMRC. "Bridging" software can link your spreadsheet to HMRC and make the submissions for you. HMRC also says free products are available for people with simple tax affairs, though they may have limits, such as a cap on transactions. You don't need an accountant, but you can agree with one who does what.

Is there a penalty-free first year for Making Tax Digital?

For the first two groups, yes, for late quarterly updates only. People who started in April 2026 get no penalties for missed quarterly update deadlines in 2026/27. And at the 28 October 2026 Budget, the government extended a similar break to people joining in April 2027.

The Budget 2026 tax document says the government "will not apply late submission penalty points to quarterly updates for the 2027-28 tax year" for people required to join in April 2027. The Budget itself says this covers their "first four quarterly updates" of 2027/28.

The table assumes you're required to join, not volunteering. Volunteers have separate penalty rules.

So it's a first-year break for two groups, and it covers less than it sounds:

• You still have to send every quarterly update before you can file your tax return.

• It doesn't cover a late tax return. That still earns a penalty point.

• It doesn't remove late payment interest or late payment penalties.

HMRC's penalties guidance was last updated in March 2026, so it doesn't mention the 2027/28 easement yet. The Budget documents are the source for now.

What happens if I miss a quarterly update?

Outside those first-year breaks, you get a penalty point. Points add up, and at 4 points you get a £200 penalty. Each further missed deadline then costs another £200 (HMRC: penalties).

How the points work:

1. You get one point per missed deadline, even if you have several businesses and they're all late.

2. A missed tax return deadline also earns a point.

3. Below 4 points, each point drops off 24 months after the missed deadline.

4. At 4 points, they stay until you've been on time for 12 months and caught up on anything outstanding.

Paying late is a separate matter. Late payment interest still runs from the first day, and it works the same way as before. Late payment penalties also apply. In your first year under the new rules, you get 30 days to pay in full or set up a payment plan before they start. After that, it's 15 days. Payments on account don't get late payment penalties.

Example: joining in April 2027

Here's a made-up example with round numbers.

Priya is a sole trader. In 2025/26 her turnover was £42,000 and her expenses were £15,000, so her profit was £27,000. Her turnover is over £30,000, so she starts Making Tax Digital on 6 April 2027.

Her 2027/28 update deadlines are 7 August 2027, 7 November 2027, 7 February 2028 and 7 May 2028. Say she sends the November update three weeks late. Under the Budget easement, that earns no penalty point. She still has to send it, and all four updates must be in before she files her 2027/28 return by 31 January 2029.

If she filed that return late, she'd get a point. And her tax bill is still due on the normal Self Assessment dates.

Will Making Tax Digital mean paying tax every quarter?

Not yet. Sending quarterly updates doesn't mean four new tax payments. You keep paying on the usual Self Assessment dates, including payments on account where they apply. Each payment on account is half of last year's bill, due by 31 January and 31 July. You usually don't make them if last year's bill was under £1,000. Our guide to how payments on account work has worked examples.

That changes from April 2029. The Budget 2026 tax document says people who make payments on account will "make more regular in year payments towards their final tax bill". It's a separate Budget measure from Making Tax Digital, though many of the same people will be affected by both.

The government's response to its consultation says it will set out "the frequency and timing of in-year payments" next year. It also says HMRC will add web and app tools in 2028 to estimate your bill and make voluntary payments early. Our guide to what the Autumn Budget means if you're self-employed covers the other changes.

Who is exempt from Making Tax Digital?

Some exemptions are automatic, and for others you have to apply. You're automatically exempt if your qualifying income is £20,000 or less, or if you didn't have a National Insurance number before the tax year started.

The Budget added more. The Budget 2026 tax document exempts these groups "until further notice":

• people eligible for qualifying care relief (such as some foster and kinship carers)

• non-UK resident foreign entertainers and sportspeople

• people expected to be non-resident

Secondary legislation for these is due before April 2027.

You can also apply if you're digitally excluded. That means it isn't reasonable for you to use software, for example because of age, health, disability or where you live. But HMRC won't accept "I used to file on paper" or "I don't know accounting software" as your only reason. Being exempt doesn't get you out of Self Assessment. You still file a tax return as normal.

How do I get ready for Making Tax Digital?

Little and often beats a panic every 3 months. A sensible order:

1. Check your qualifying income for the relevant tax year, using HMRC's checker, including the exemption questions.

2. Make sure you're registered for Self Assessment and have filed a return in the last 2 years. You need both to sign up.

3. Choose compatible software that covers all your income sources, or agree with your accountant who does what.

4. Sign up and authorise your software.

5. Pick a regular time each month to check and match up (reconcile) your income and costs.

If your income later drops below the threshold for 3 tax years in a row, you can choose to opt out.

Still got questions?

Will HMRC tell me if I need to use Making Tax Digital? It usually writes if your tax return shows income over the threshold. If you don't get a letter, you still need to check and sign up yourself.

Do I need an accountant for Making Tax Digital? No. You can do it yourself with compatible software. Some people prefer an accountant to send the updates for them.

Does the 2027/28 easement apply if I started in April 2026? No. It covers people required to join in April 2027. If you started in April 2026, late quarterly updates in 2027/28 can earn penalty points.

Do I still file a tax return under Making Tax Digital? Yes. The four quarterly updates don't replace it. Your return for the year is still due by 31 January after the tax year ends.

Can I use a spreadsheet for Making Tax Digital? Yes, alongside bridging software that links it to HMRC. A spreadsheet alone can't send updates.

What if I have no income in a quarter? You still send the update, showing nothing for that period.