Bookkeeping and Making Tax Digital for Income Tax: What's Changing and When

MTD for Income Tax applies to self-employed individuals and landlords above specified qualifying income thresholds (see GOV.UK's guidance on who needs to use it, and when), phased in over several years rather than all at once — those with the highest qualifying income are brought in first, with lower thresholds following in subsequent years. From 6 April 2026, the mandate applies to anyone with qualifying income over £50,000.

"Qualifying income" for the threshold test is gross income from self-employment and property combined, before expenses — a business with modest profit but high turnover can still be well above the threshold, which surprises people who think in terms of profit rather than gross income.

This currently applies to sole traders and landlords, not limited companies — but the direction of travel, VAT first and then Income Tax, makes an eventual extension toward corporation tax reporting a reasonable planning assumption, not something to build a structure around avoiding.

Digital records have to be kept using MTD-compatible software — the same "digital links" principle that applies to VAT, no manually retyping figures between disconnected systems, applies here too.

Instead of one Self Assessment return a year, quarterly updates are submitted to HMRC through the tax year, followed by a final declaration after the year ends — a materially different rhythm from the single annual filing most sole traders and landlords are used to.

The quarterly updates are a running total of income and expenses, not a full tax computation each time — the more detailed calculation, allowances and reliefs, still happens at the final declaration stage, but the underlying records need to be accurate and current throughout the year for each quarterly update to be meaningful rather than a formality.

Records that are accurate but live in a spreadsheet updated periodically, rather than software with a genuine digital link to the return, will not meet the requirement even if the year-end numbers have always been correct.

Property landlords in particular often have the least digitised records of any group MTD for Income Tax applies to — a portfolio managed through bank statements and a personal spreadsheet is a much bigger jump to compliance than a sole trader already using basic accounting software.

The gap between compliant and not compliant isn't about accuracy, it's about process — which means the fix has to happen before your mandate date, not be discovered at your first quarterly deadline.

Check your qualifying income against the current threshold schedule to know which year you're actually brought in, rather than assuming it's further away than it is.

Move to MTD-compatible digital bookkeeping well before the mandate date, not in the weeks before it — the point of doing it early is to have a full quarter of working under quarterly updates before it's compulsory, so the first real deadline isn't also the first time the process has been tested.

If you have both self-employment and rental income, both count toward the combined qualifying income threshold — reviewing that combined position, not each income source separately, is what actually determines your mandate date.