If you are a sole trader or a landlord in the UK, the way you report your income to HMRC has started to change. Since 6 April 2026 the first group of people has been keeping digital records and sending HMRC an update every quarter, and two more groups follow in 2027 and 2028. I’m Wayne George, a software engineer in London, and one of my personal projects is a Making Tax Digital tool, which is a good excuse to read the rules properly. This article explains what they say, what they mean in practice, and what HMRC’s developer documentation tells you about how the system is meant to work.
One caution first: I am an engineer, not an accountant. Everything below comes from HMRC’s published guidance, with links so you can check it, but it is not tax advice.
What Making Tax Digital for Income Tax is
Making Tax Digital for Income Tax (often shortened to MTD ITSA) does not change how much tax you pay. It changes how you keep records and how often you tell HMRC about them. Instead of one Self Assessment return in January, you keep records digitally, send HMRC a summary four times a year through software, and finish with a tax return, also through software.
HMRC’s guide Use Making Tax Digital for Income Tax covers the four core stages: create digital records, send quarterly updates, adjust your self-employment and property income, and submit your tax return. I’ll take each in turn, but first the question most people ask: does this apply to me, and when?
Who is affected, and when
The rollout is phased by “qualifying income”: your total income from self-employment and property combined, before expenses, taken from the tax return you submitted for the earlier year. PAYE employment income, dividends (including from your own company), the State Pension and private pensions do not count. The details are on the qualifying income page.
The timetable, as set out on the eligibility page, is:
- Qualifying income over £50,000 in the 2024/25 tax year: you should have started from 6 April 2026.
- Over £30,000 in 2025/26: you start from 6 April 2027.
- Over £20,000 in 2026/27: you start from 6 April 2028.
So if your gross income from self-employment and property together was over £50,000 in 2024/25, you are in the first cohort and your first quarterly update was due on 7 August 2026. If you have not done anything yet, HMRC has said that from September 2026 it will start signing up anyone who needs to use the service for 2026/27 and has not signed themselves up. It only uses the information it already holds, so if your circumstances have changed since your last return you will need to correct them.
Some people can be exempt, for example if they are digitally excluded, and there is a process to apply for an exemption. If you are exempt you still file a Self Assessment return as normal.
The four things you have to do
Keep digital records
Every transaction needs three things in your software: the amount, the date the income was received or the expense incurred, and a category that mirrors the Self Assessment return. There are some sensible simplifications. If you make retail sales you can record daily gross takings rather than every individual sale, and if turnover from a source is under £90,000 you can use simpler categorisation and record only whether each transaction is income or an expense. Full details are on the digital records page.
Spreadsheets still count, as long as data moves into your submission software through digital links (linked cells, CSV import and export, an emailed spreadsheet, an API) rather than by retyping. Once a record has been sent to HMRC in a quarterly update you must not move it by hand. Records have to be kept for at least five years after the 31 January deadline for that tax year.
Send quarterly updates
By default the update periods follow the tax year, and each one runs from 6 April rather than from the end of the previous quarter, with these deadlines:
- 6 April to 5 July, due 7 August
- 6 April to 5 October, due 7 November
- 6 April to 5 January, due 7 February
- 6 April to 5 April, due 7 May the following tax year
If your accounting period runs from 1 April to 31 March you can use calendar quarters instead (1 April to 30 June, and so on), with the same deadlines. Notice that updates are cumulative, covering the year to date rather than the last three months. That is a good design decision, because a mistake in an earlier quarter is corrected simply by sending the next update with the right totals. HMRC receives only the totals for each income and expense category, not your individual receipts and invoices. The quarterly updates page has the full list.
Adjust and submit your tax return
After the fourth update you make any year-end adjustments to your self-employment and property figures, add every other source of income and gains, review HMRC’s tax calculation, and submit the return through your software, declaring that it is correct and complete. The deadline is unchanged: 31 January following the end of the tax year. Elsewhere you may see this stage called the “final declaration”; HMRC’s current guidance simply calls it submitting your tax return.
Use compatible software
All of this has to go through software that talks to HMRC. HMRC distinguishes between software that creates and stores your records (by linking to a bank account, scanning receipts or manual entry) and “bridging” software that connects to records you already keep in a spreadsheet. Free products exist for people with simple affairs, though they may cap the number of transactions. The compatible software page links to HMRC’s finder tool, which is the list you should trust.
Penalties
There is a soft landing. HMRC’s penalties page says there are no penalties for missing a quarterly update deadline in the 2026/27 tax year. From 2027/28, each missed quarterly update or tax return deadline earns a penalty point, and at four points you get a £200 penalty, then £200 for each further missed deadline.
Late payment is treated separately and applies from the start. For 2026/27, tax paid up to 15 days late attracts no penalty; from day 16 it is 3% of what was owed at day 15 (waived in your first year); after 30 days a further 3% of what was owed at day 30 is added, plus an annual rate of 10%, charged daily from day 31 until you pay or for up to two years. For 2027/28 the two percentages rise to 4%.
Why I built my own tool
I run a small consultancy, Frontier Consulting, and I write iOS apps in my own time; some of them are on the work page. The best way I know to understand a system is to build against its API, and this one is about to touch a great many small businesses. So one of my side projects is a Making Tax Digital app for UK self-employed submissions: income and expense tracking, quarterly HMRC integration, and tax estimates.
I should be blunt about what that is. It is a personal project, still in progress, not a product. HMRC has said it is no longer accepting production credential access requests for new 2026/27 quarterly update products, because the market window for those products has closed, so no new tool can be recognised for this tax year in any case. If you need something for your own return, use the finder tool above.
What the developer documentation tells you
The developer documentation is worth knowing about even if you never write a line of code, because it shows how the pieces are meant to fit together, and HMRC’s developer hub is unusually good at explaining itself. The end-to-end service guide walks through the whole process, from signing a user up to submitting their return, and the Self Employment Business API (version 5.0 at the time of writing) carries the quarterly and annual submissions.
Authorisation is standard OAuth 2.0 with the authorisation code grant. HMRC’s page is admirably terse about the timings: “An access token lasts 4 hours”, and “After 18 months, refresh tokens stop working. At this point, you must go through the authorisation process again.” That is worth knowing as a user and not only as a developer. You sign in to HMRC, not to your bookkeeping software, and the permission you give it is not permanent. There is also a sandbox at test-api.service.hmrc.gov.uk, where a Gov-Test-Scenario header makes the service return a chosen outcome, so the awkward paths can be exercised without going anywhere near a real tax record.
Two features of the design shape anything built on top of it. The first is the cumulative model. Because every update covers the year to date, MTD software is not really a submission tool at all; it is a ledger that has to be right at every point in the year, from which a submission falls out almost as a by-product. A tool in this space has to answer three questions at any moment: what has come in, what has gone out and under which category, and what those two imply for the eventual bill. The third is cheap once the first two are accurate, which is why tax estimates are such a common feature, mine included.
The second is the fraud prevention headers. HMRC is direct about this: “You are required by law to submit header data for the VAT (MTD) and Income Tax Self Assessment (MTD) APIs.” The headers carry audit data about the device and connection a submission came from, and which ones you must send depends on how your software connects — a desktop application talking straight to HMRC has fourteen of them to supply, covering everything from local IP addresses and MAC addresses to screen sizes and whether multi-factor authentication was used. HMRC runs a whole separate Test Fraud Prevention Headers API for checking them, which “checks the value and format and gives you feedback on any issues”. When a specification comes with its own validation service, that tells you something about how easy it is to get wrong. This is a proper piece of work, not a tick-box exercise.
There is one more thing I keep coming back to, and it is about behaviour rather than code. Whether or not HMRC planned it this way, a system that makes you total up your year four times is also a system that makes you look at your likely bill four times, and I suspect that will change more about how sole traders run their finances than any of the filing mechanics.
A practical checklist for 2026/27
If you are a sole trader in the first cohort, or think you might be, here is what I would do this month.
- Work out your qualifying income for 2024/25 from the return you submitted: self-employment turnover plus property income, before expenses. Over £50,000 means you are in.
- Sign up for Making Tax Digital for Income Tax if you have not already. If HMRC signs you up automatically, check that the business details it holds are still right.
- Pick compatible software from HMRC’s finder tool. If you already keep a spreadsheet you are happy with, bridging software may be the least disruptive route.
- Get your records from 6 April 2026 onwards into it, with amount, date and category for each transaction. If turnover from the source is under £90,000, income-or-expense is enough.
- Send the first update now if you missed 7 August. There is no penalty this year, and because updates are cumulative one update covers the year so far.
- Put 7 November 2026, 7 February 2027, 7 May 2027 and 31 January 2028 in your calendar.
- Set money aside for the tax as you go. Late payment penalties still apply this year: only the first 3% is waived in your first year, and the day-30 penalty and the 10% annual rate build up from there.
- If you use an accountant, ask them now how they want to handle the updates. They can sign you up and submit on your behalf.
Where to go from here
The rules are less frightening than the acronym. Keep digital records, send four cumulative updates, file the return through software, and pay on time.
What the deadline really exposes is how much bookkeeping is still done by hand in small firms, which is a much older problem than MTD; I have written separately about where automation pays off first in a small firm. If you would like to talk about the record-keeping side of it for your own business, the about page has ways to get in touch.