Last updated on 7 August 2026
Making Tax Digital in the UK: Are You Ready for a Tax Change?
If you are self-employed or a landlord in the UK, Making Tax Digital replaces the annual Self Assessment with mandatory quarterly digital reporting from 6 April 2026 for those earning over £50,000.
That is not a distant change anymore. It is less than two months away for the first group of people.
And, a lot of sole traders and landlords still have no idea this is coming, what it actually requires, or whether they are even in scope.
What is Making Tax Digital, Really?
Making Tax Digital (MTD) is the UK government’s long-term plan to modernise how tax is recorded and reported. Instead of scrambling to total up figures at the end of the year and submitting one Self Assessment by 31 January, the system shifts everything to ongoing digital record-keeping.
Under MTD, you maintain electronic records as you go and send updates to HMRC every quarter rather than once a year.
The idea is that your tax position is built up in real time, not reconstructed months later from bank statements and receipts.
MTD for VAT has been compulsory for VAT-registered businesses since 2022, and most affected businesses have already transitioned to compatible software.
The next stage is MTD for Income Tax. It will apply to a far broader audience, including sole traders, independent contractors, and landlords throughout the UK.
According to the government, the purpose behind the shift is simple. You make fewer mistakes, keep clearer records, and manage taxes more easily by handling them steadily throughout the year instead of all at once.
Who Does MTD for Income Tax Apply To?
Not everyone moves onto Making Tax Digital at the same time. The introduction follows a staggered timeline based on your qualifying income. This income includes your total gross earnings from self-employment and property before you deduct expenses.
According to the GOV.UK, if your qualifying income exceeds £50,000 in the 2024–2025 tax year, you must start using MTD from 6 April 2026. If it exceeds £30,000 in the 2025–2026 tax year, you join from 6 April 2027.
From April 2028, HMRC will lower the threshold and include sole traders and landlords with gross income above £20,000.
So, if you are a freelance consultant billing £60,000 annually, or a landlord receiving £55,000 in rental income, April 2026 is your start date. It is crucial to understand that these limits are based on turnover, not profit.
Even if your net profit is relatively low after costs, crossing the gross income threshold means you fall within the MTD rules.
What Changes in Practice?
Under the current system, you keep records however you like, total everything up, and file one return a year. Under MTD, that changes.
You will be required to use software that is compatible with HMRC’s systems to maintain digital records on an ongoing basis.
Rather than submitting everything annually, you will send quarterly updates summarising your income and allowable expenses for each separate business or property source.
For example, in the 2026–2027 tax year, the first quarterly reporting period runs from 6 April 2026 to 5 July 2026. That update must be submitted by 7 August 2026.
After that, three more quarterly updates follow, and then a final end-of-year declaration that wraps everything up.
That final declaration is where you add in other income sources, claim reliefs, and confirm your overall tax position for the year. It works similarly to the current Self Assessment return, but it sits at the end of a year of quarterly submissions rather than being a standalone filing.
The key point is that paper records, basic spreadsheets without approved software links, and informal bookkeeping systems will no longer be enough. Your records need to live inside software that can talk directly to HMRC’s systems.
What About the MTD Penalties?
Alongside MTD, HMRC is rolling out a new points-based penalty regime. Instead of an immediate fine for a single late submission, you receive a penalty point.
Each missed deadline adds another point, and once you hit the relevant threshold, a £200 financial penalty is triggered. If you stay compliant for a sustained period, those points can expire, effectively resetting your position.
There is also a transitional “soft-landing” approach for those entering MTD in April 2026.
The government has confirmed that taxpayers joining at that stage will not receive penalty points for late submission of their first four quarterly updates. The aim is to give businesses and landlords breathing space while they adjust to the new reporting cycle.
However, HMRC has made it clear that everyone must comply from day one, and taxpayers must submit quarterly updates before filing the final return.
On top of late filing penalties, the existing penalty for failing to keep adequate digital records can be up to £3,000 per failure. That is not a theoretical risk. If your records are incomplete or you have breaks in your digital chain, HMRC has the power to fine you for it.
Crypto Income and MTD: A Specific Problem
If you earn income from crypto, whether through trading as a business, staking, or rental income alongside crypto activity, MTD adds complexity to your tax position.
Crypto income does not always fit neatly into the standard categories that MTD software uses.
For instance, HMRC treats staking rewards as income and requires taxpayers to report them.. If that income is above the threshold when combined with your other self-employment or property income, it pulls you into MTD.
But the software options for handling crypto alongside MTD reporting are still catching up.
This is exactly why working with a crypto tax accountant who also understands MTD is so valuable right now.
Are There Any Exemptions?
Individuals without a National Insurance number and non-UK resident entertainers or sportspeople without other qualifying income are exempt from MTD.
You can apply to HMRC for an exemption if you are digitally excluded due to age, disability, or location.
Non-UK residents, individuals under split-year treatment, and those claiming relief under double tax treaties will move to Making Tax Digital in April 2027. While HMRC designs the relevant parts of the system to accommodate their situation.
This includes people claiming relief under the new Foreign Income and Gains regime that replaced the remittance basis from April 2025.
If you think you might be exempt, do not assume. Check the HMRC tool directly, or get advice. The responsibility for checking whether and when you need to sign up sits with you, not with HMRC.
What Should You Do Right Now?
If you are in the first wave, income over £50,000, the time to act is now, not in March 2026.
Start by choosing your software. HMRC publishes a list of compatible software products. Some are free for simple cases, others are paid.
You need software that can maintain digital records and submit quarterly updates directly to HMRC. If you have crypto income in the mix, check whether the software handles that before you commit to it.
Next, review how you currently keep your records. If you are still working from a spreadsheet or a paper ledger, start moving that to a digital format now. Practice using the system before it becomes mandatory.
And if your tax affairs are anything above straightforward, talk to a specialist.
The best crypto accountant in the UK for your situation is one who knows ‘Making Tax Digital’. They understand how your income sources are classified and can make sure your quarterly submissions are accurate from the start.
Ready to Get MTD-Compliant Without the Headache?
Making Tax Digital is not optional and it is not going away. The deadlines are set, the software requirements are clear, and HMRC will apply penalties for mistakes.
If you want to go into April 2026 with your records in order, your software sorted, and a clear understanding of your quarterly obligations, the best crypto accountant in the UK for complex income situations can make that happen without the stress.
At Crypto Accountants, we work with self-employed individuals, landlords, and crypto holders who need MTD compliance alongside accurate, specialist tax advice.
Visit Crypto Accountants to speak with our team. The April 2026 deadline is closer than it looks.
