Making Tax Digital for Income Tax in 2026: a practical first-year checklist

Making Tax Digital for Income Tax moved from a future change to a live obligation on 6 April 2026. For the first group of sole traders and landlords, bookkeeping software is now part of the route through Self Assessment rather than an optional convenience.

The basic idea sounds simple: keep digital records, send HMRC summaries during the year and complete the tax return through compatible software. The practical work sits underneath those words. A business needs to know whether it is in scope, which income counts towards the threshold, how each activity is represented in software and who is responsible for checking the final figures.

This article is general information, not individual tax or accounting advice. HMRC guidance changes, so follow the linked source material and check the position that applies to you before acting.

Who had to start in April 2026?

The first mandatory group consists broadly of individuals already within Self Assessment who receive income from self-employment or property and whose qualifying income for 2024–25 was more than £50,000.

“Qualifying income” is turnover before expenses, not taxable profit. It combines gross self-employment and property income. That distinction matters: a landlord or sole trader with modest profit can still cross the threshold because the test is based on income before costs.

HMRC’s published timetable then lowers the threshold in stages: more than £30,000 from April 2027, based on the 2025–26 return, and more than £20,000 from April 2028, based on the 2026–27 return. Partnerships and limited companies are not brought into this Income Tax regime merely because they use accounting software; the rules described here concern qualifying individuals.

The four moving parts

1. Digital records

Income and expense records must be created and stored in software that works with Making Tax Digital. The record normally needs the amount, date and category of each transaction. Digital record keeping does not remove the need to retain supporting material such as invoices and bank statements.

The sensible operational question is not simply “Do we own software?” It is “Where does each transaction first enter the system, and how is it checked?” Bank feeds reduce typing but do not decide whether an item is business, private, capital or revenue. Automation moves work; it does not remove judgement.

2. Quarterly updates

HMRC’s published standard deadlines for the first mandatory year are:

• first quarterly update: 7 August 2026;
• second quarterly update: 7 November 2026;
• third quarterly update: 7 February 2027; and
• fourth quarterly update: 7 May 2027.

These dates come directly from HMRC’s first-year MTD timetable. The updates are summaries of income and expenses from the digital records. They are not four miniature tax returns, but they still depend on records being complete enough to produce a meaningful submission.

HMRC has said it will not apply penalty points for late quarterly updates in 2026–27. That easement does not remove the obligation, and the updates must still be sent before the return can be completed.

3. Year-end review and the tax return

Quarterly submissions are not the end of the process. After the tax year, the records must be reviewed and adjusted. Other income and gains may need to be added, and reliefs or allowances considered. The taxpayer then submits the tax return through compatible software and pays by the normal 31 January deadline.

This is where professional judgement remains visible. A bank transaction may be recorded correctly as £600, yet still require a decision about business use, capital treatment, VAT or deductibility.

4. Responsibility

An agent can help configure software, review records and submit information, but the taxpayer remains responsible for complete and accurate information. Agree responsibilities explicitly: who records cash income, checks bank-feed matches, resolves queries, closes each quarter and approves submissions?

A practical first-year checklist

1. Confirm scope. Check the qualifying income on the relevant return and consider whether an exemption or other special rule may apply.
2. Choose compatible software. Test the whole journey, not just whether a product appears on a list. Consider multiple businesses, jointly owned property, bank feeds, corrections, agent access and the final return.
3. Separate business and private activity. A dedicated business bank account is not always legally required, but it can reduce classification work and mistakes.
4. Set an evidence routine. Decide how invoices, receipts and statements are captured, named, retained and linked to entries.
5. Clean opening data. Duplicate contacts, uncleared old items and inconsistent categories make automation less reliable.
6. Run a monthly review. Waiting until the quarterly deadline turns small uncertainties into a larger reconstruction exercise.
7. Document adjustments. Keep a short explanation and evidence for corrections or unusual treatment.
8. Plan for failure. Know who to contact if software, authorisation or a bank feed stops working near a deadline.

The useful way to think about MTD

Making Tax Digital is often presented as a filing change. In practice, it is a process-design change. The organisations likely to find it least disruptive are those that make record keeping routine, give exceptions to a real person to resolve and reserve enough time for review.

The goal should not be four perfectly polished management accounts. Nor should it be four hurried button presses. It should be a dependable flow of evidence into records, records into summaries and summaries into a properly reviewed annual return.

Further reading on The Perry

• Working from home when self-employed: simplified expenses or actual costs?
• Before you paste it into AI: a data-safety checklist for UK small businesses
• How to choose a password manager: a practical UK guide without a league table

Sources and further reading

• HMRC: Use Making Tax Digital for Income Tax — overview and first-year checklist
• HMRC: Making Tax Digital for Income Tax guidance collection
• HMRC: Creating digital records
• HMRC: Submitting the tax return through MTD software
• The Income Tax (Digital Obligations) Regulations 2026

Source check: 23 August 2026. Tax rules and HMRC guidance can change.

Featured image credit: Photo by Kelly Sikkema on Unsplash.