Making Tax Digital for Income Tax in 2026: a sole trader's guide

Making Tax Digital for Income Tax (MTD) is now live. Since 6 April 2026, UK sole traders and landlords with qualifying income over £50,000 must keep digital records and send HMRC a summary every quarter from compatible software. The threshold falls to £30,000 in April 2027 and is planned to fall to £20,000 in April 2028. The first year is gentle on penalties, so it's the right time to set up good habits.

Who has to use MTD for Income Tax, and when

The test is your qualifying income, which is your self-employment and property income added together before expenses. It is turnover, not profit. HMRC's guidance on who needs MTD and when sets out three steps:

HMRC uses the Self Assessment return you've already filed to decide. Your 2024 to 2025 return decided whether you started this April, and the return you file by 31 January 2027 decides the April 2027 group. The £20,000 step has been announced, and the government has said it will legislate for it.

A few groups are outside the rules for now. Your share of a partnership's profit doesn't count as qualifying income, according to HMRC's MTD update log, and partnerships have no start date yet. People who are digitally excluded can apply for an exemption, though they still file a normal Self Assessment return. Limited companies pay Corporation Tax, not Income Tax, so they aren't in this scheme at all.

What changes in practice

Two things change: how you keep records, and how often you tell HMRC about them.

Digital records. Each sale and each expense has to be recorded in software, or in a spreadsheet linked to software, rather than in a paper book. You still decide how detailed each entry is, but the totals have to come from the digital records, not be retyped by hand.

Quarterly updates. Four times a year, your software sends HMRC a summary of your income and expenses so far. According to HMRC's guidance on quarterly updates, each update is cumulative from 6 April, it isn't a tax return, and HMRC doesn't receive your individual invoices. You must send one even in a quarter with no income.

The year-end. After the fourth update you check any adjustments (allowances, accounting changes) and submit your return through the same software, by the usual 31 January deadline.

The quarterly deadlines

The deadline for each quarterly update is the 7th of the month after the quarter closes. HMRC moved it there in May 2025.

You can choose calendar quarters instead (ending 30 June, 30 September, 31 December and 31 March) with the same deadlines. You have to pick before your first update, and you can't switch during the tax year. You may send an update up to 10 days before a quarter ends if you won't have any more transactions in it.

Penalties: generous in year one, then points

The late submission rules use points, and HMRC has switched them off for the first year. Its penalties guidance says: "There are no penalties for missing a quarterly update deadline for the 2026 to 2027 tax year."

From 2027 to 2028, each missed deadline earns a point. At 4 points you get a £200 penalty, and another £200 each time you miss a deadline after that.

Paying late is separate, and it does apply now:

• Up to 15 days late: no penalty.
• 16 to 30 days late: 3% of the tax owed at day 15.
• 31 days or more: 3% at day 15, 3% at day 30, then a further penalty charged daily at 10% a year until you pay.
• From 2027 to 2028: the two fixed charges rise to 4% each.

HMRC also gives you 30 days instead of 15 before the first charge in your first year under the new rules. Interest on the unpaid tax is charged on top in every case.

Choosing software

You need software that HMRC lists as compatible. Its software finder, last updated in July 2026, says to pick the software before you sign up. There are two kinds:

• Full accounting software that keeps your records and sends updates in one place.
• Bridging software that connects to spreadsheets or "other accounting tools" and sends the submissions to HMRC.

HMRC notes that free products exist for simple tax affairs, with limits. If you use an accountant, ask which product they work in before you choose.

Make each quarter a ten-minute job

Most of the pain in MTD comes from income records that live in three places: an invoicing tool, a bank feed and an inbox full of payment emails. Fix that and the quarterly update becomes a check, not a project.

1. Send every invoice from one system. One numbering sequence, one place to see what was billed in a date range.
2. Record payments against invoices. Marking an invoice paid on the day the money lands means your income figure is right without a reconciliation session.
3. Correct with credit notes, not edits. If a total changes after you send it, issue a credit note so the records add up. If you take deposits, bill them as their own numbered invoices (our guide to how much deposit to charge before booking covers the amounts).
4. Export by quarter. Pull your invoices for each quarter's dates and import them into your MTD software, or let a connection do it.
5. Keep the records. HMRC says self-employed records must be kept for at least 5 years after the 31 January deadline for that tax year, and we cover how long to keep everything else in how long to keep client files and records.

Your accountant will tell you how your own figures should be split. Check anything about your own tax position with them.

How Delivvo keeps your sales records ready for each quarter

Delivvo keeps every quote, invoice, credit note and payment on the client record, so the income side of your MTD records is already in order when the quarter ends. It isn't MTD software and doesn't send updates to HMRC. It feeds the software that does.

Here is how a quarter works with Delivvo:

• Invoices go out from one place. Each invoice is numbered in sequence, in your format, with your business details and VAT number when you have one. Deposits and instalments (up to 12 per job) follow the same sequence.
• Payments land on the invoice. When a client pays through your own Stripe, PayPal or Square account, the invoice is marked paid on its own. For bank transfers or cash, you record the payment, including part payments, in a few clicks.
• Corrections leave a trail. Void an invoice with nothing paid on it, or issue a credit note with its own number. Nothing is overwritten.
• Export the quarter. The invoice export takes a from and to date and gives you a CSV of invoices and credit notes, one row per line with tax and totals, laid out for QuickBooks Online, Xero and Zoho Books to import. Zoho Books can also connect directly from the Integrations page.

Your bridging or accounting software then does the HMRC part. Delivvo takes 0% of every payment, so the totals in your export are what your clients actually paid you, before your own processor's fee. See how invoicing works on the invoicing page.

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