Who does Making Tax Digital (MTD) for Income Tax apply to?

What is Making Tax Digital (MTD)?

Making Tax Digital (MTD) is HMRC’s new initiative to digitise the UK tax system. It requires businesses, self-employed individuals and landlords to keep digital records and submit tax information to HMRC quarterly, using approved software (like Taxfix).

The goal is to reduce errors, make tax administration more efficient and help taxpayers stay on top of their accounts throughout the year, rather than rush to file them all at once in January.

If you’re in scope, MTD means reporting your income to HMRC four times a year, not just once. 

In practice, that means:

• Keeping digital records of your income and expenses
• Using MTD-compliant software
• Sending quarterly updates to HMRC
• Submitting an annual Final Declaration

Not sure if you’re eligible? Try our Eligibility Checker.

Your MTD Timeline & Deadlines

6 April 2026 – MTD goes live – you need to get set up
7 August 2026 – 1st quarterly update due (Apr – Jun ’26)
7 November 2026 – 2nd quarterly update due (Jul – Sept ’26)
7 February 2027 – 3rd quarterly update due (Oct – Dec ’26)
7 May 2027 – 4th quarterly update due (Jan – Mar ’27)
31 January 2027 – File your 2025-26 Self Assessment
31 January 2028 – File your 2026-27 Final Declaration

Who is Eligible for Making Tax Digital?

MTD for ITSA applies to self-employed individuals and landlords, and is being rolled out in three phases based on gross income:

Phase	Date	Who is affected	Status
Phase 1	April 2026	Gross income over £50,000	Live Now
Phase 2	April 2027	Gross income over £30,000	Coming Soon
Phase 3	April 2028	Gross income over £20,000	Planned

Important Note
Gross income means your total income before any expenses of allowances are deducted.

Check if you’re affected by MTD with our Eligibility Checker.

Are There Any Exemptions from Making Tax Digital?

HMRC does provide exemptions in certain circumstances. However, you must apply for an exemption – it is not granted automatically. Accepted reasons include:

• Disability or health condition – where keeping digital records is not reasonably practicable due to a physical or mental impairment.
• No reliable internet access – if you live in a location where broadband or mobile connectivity is genuinely unavailable.
• Religious beliefs – if your religious convictions are incompatible with using electronic communications.

• Insolvency – businesses subject to formal insolvency proceedings may be exempt during that period.
• Other HMRC discretion – HMRC may grant exemptions on a case-by-case basis if it is not reasonably practicable to comply.

For your specific cases, check out HMRC’s MTD exemption guidelines.

Fines and Penalties for MTD Non-Compliance

HMRC operates a points-based penalty system for MTD non-compliance. Penalties apply separately for late submissions and late payments, and can stack up quickly if ignored.

Late Submission Penalties

Every missed quarterly update earns you a penalty point. Once you reach your penalty threshold, a £200 fine is issued, with another £200 for every subsequent missed submission.

Good to know:
Penalty points expire after 24 months, but only once you have returned to full compliance for a minimum period.

Late Payment Penalties

Separate penalties apply if you pay your tax bill late. These are percentage-based and compound the longer you delay.

Days Overdue	Penalty
1-15 days late	No automatic penalty (but interest accrues)
16-30 days late	2% of unpaid tax
31+ days late	2% at day 30 + 2% of remaining balance daily
6 months late	Additional 4% per annum on outstanding balance
12 months late	A further 4% per annum – total can reach 8% p/a

Late Payment Interest

On top of penalties, HMRC charges interest on overdue tax at the Bank of England base rate +2.5%, accruing from the day after the payment deadline.

Appealing a Penalty:

You can appeal an HMRC penalty if you have a reasonable excuse. These may include serious illness, bereavement or a genuine HMRC systems failure. Appeals must be submitted within 30 days of the penalty notice.

For more information on the penalty system, read our MTD Penalties article.