Making Tax Digital is here — and the next wave is bigger than the first

If you're a sole trader or a landlord, the way you report your income to HMRC has already changed — or it's about to.

Making Tax Digital for Income Tax went live on 6 April 2026. From that date, anyone with qualifying income from self-employment or property above £50,000 has had to keep digital records and send HMRC a quarterly update, rather than one annual Self Assessment return.

Around 864,000 people were caught in that first wave. The next two are considerably larger.

The timetable

Note what that last line means in practice. Your 2026/27 figures — the ones you're earning right now — are what determine whether you're mandated from April 2028. A good year now can pull you into the regime two years later.

‘Qualifying income’ is not profit

This is the single most common misunderstanding we see, and it's an expensive one.

It's also combined. Self-employment and property income are added together. Someone with a £15,000 consultancy sideline and £12,000 of rent has £27,000 of qualifying income, even though neither source on its own looks anywhere near the line.

What actually changes

Four quarterly updates a year, plus a final declaration that replaces the old Self Assessment return. Records have to be kept in compatible software — a spreadsheet you email over no longer cuts it, and neither does the carrier bag of receipts (we'll miss it, honestly).

What doesn't change: your tax payment dates. 31 January and 31 July stay exactly where they are. The quarterly updates are reporting, not paying. Plenty of people have assumed otherwise and budgeted for a cash flow problem that doesn't exist.

The bit worth acting on

MTD comes with a points-based penalty regime. Miss a quarterly deadline and you collect a point; collect enough points and a fixed penalty follows. Late payment interest currently runs at 7.75% — the Bank of England base rate plus four percentage points. In early 2022 that figure was 2.6%. Paying HMRC late has quietly become one of the most expensive forms of borrowing available to a small business.

The businesses finding this transition easy have one thing in common: they were already on cloud software and already reconciling monthly. The ones struggling are the ones who did their books once a year in a panic.

If that second description sounds familiar, the fix is straightforward and the window to make it calmly is now — not the week before your first update is due.