Who Does Making Tax Digital (MTD) for Income Tax Apply To? 2026/27 Guide

The 2026/27 tax year brings the most significant shift to self-assessment reporting in decades. Tax professionals and their clients must clearly understand the new rules, as HMRC transitions millions of taxpayers to digital record-keeping.

If you are asking, who does Making Tax Digital (MTD) for Income Tax apply to?, this guide details the exact scope, thresholds, and exemptions for the 2026/27 tax year.

The Core Scope: Who Must Comply?

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) applies directly to self-employed individuals (sole traders) and landlords.

For the 2026/27 tax year, commencing 6 April 2026, HMRC mandates MTD for ITSA for sole traders and landlords whose total qualifying income from trading and property exceeds £50,000.

At present, HMRC excludes general partnerships from the 2026 rollout, though the government remains committed to bringing partnerships into the regime at a later date.

The Mandation Phases

HMRC will stagger the introduction of MTD for ITSA across three main phases based on income thresholds:

• From 6 April 2026: Mandatory for qualifying income over £50,000.
• From 6 April 2027: Mandatory for qualifying income over £30,000.
• From 6 April 2028: Mandatory for qualifying income over £20,000.

Calculating “Qualifying Income”

To determine if a taxpayer breaches the £50,000 threshold for the 2026/27 tax year, HMRC looks back at the historical data. Specifically, HMRC assesses the total qualifying income reported on the taxpayer’s 2024 to 2025 Self Assessment tax return.

Qualifying income represents the gross income (before expenses) from specific sources. For a UK tax resident, qualifying income includes:

• UK self-employment income.
• UK property income.
• Foreign property income.

HMRC explicitly excludes certain income types from this calculation. One-off transactions in UK land that fall within a single tax year do not count towards qualifying income.  Furthermore, income derived from UK Real Estate Investment Trusts (UK REITs) or Property Authorised Investment Funds (PAIFs) is also excluded.

Exemptions from MTD for Income Tax

Not all sole traders and landlords must participate. HMRC provides several automatic, temporary, and application-based exemptions.

Automatic Exemptions

Taxpayers automatically fall outside the MTD for ITSA scope if:

• Their qualifying income is £20,000 or less.
• They do not possess a National Insurance number before the start of the tax year.
• They operate as a non-resident company submitting an SA700.
• They act as a trust submitting an SA900.
• They act as a personal representative for a deceased person (though they may still need to use MTD for their own personal income).

Temporary Exemptions (Until April 2027)

HMRC grants a one-year deferral (until the 2027/28 tax year) for individuals who included specific claims on their 2024 to 2025 tax return.  You do not need to apply for this deferral if you:

• Claimed averaging relief (e.g., farmers, market gardeners, or creators of literary/artistic works).
• Claimed qualifying care relief (such as foster carers).
• Included the SA107 supplementary page to report trust or estate income.
• Included the SA109 supplementary page for non-residency.

Application-Based Exemptions

Taxpayers can proactively apply for an exemption if they are “digitally excluded.” HMRC mirrors the existing MTD for VAT exemptions here, granting exclusions to those who cannot engage digitally due to age, disability, location, or religious beliefs.  Taxpayers can apply for this exemption via non-digital means, such as by phone or in writing.

Quarterly Updates and Deadlines

Once mandated, taxpayers must maintain digital records and submit quarterly updates to HMRC using compatible software.  These updates provide cumulative summaries of business income and expenses from the start of the tax year.

For taxpayers using standard update periods that align with the tax year (6 April to 5 April), the submission deadlines are fixed:

• Quarter 1 (6 April to 5 July): 7 August.
• Quarter 2 (6 April to 5 October): 7 November.
• Quarter 3 (6 April to 5 January): 7 February.
• Quarter 4 (6 April to 5 April): 7 May (the following tax year).

Note: Today is 7 August 2026, which marks the exact deadline for the very first quarterly update of the 2026/27 mandation phase.  Taxpayers can submit an update up to 10 days before the end of the update period if they expect no further transactions.

Penalties and Enforcement in 2026/27

HMRC has introduced a new points-based penalty system for late submissions. Under this regime, reaching a specific penalty point threshold triggers a £200 fine.

However, HMRC offers a soft landing for the initial rollout. During the 2026 to 2027 tax year, HMRC will not apply penalty points for late quarterly updates.  Taxpayers must still eventually submit these updates, but the immediate threat of late-submission points is waived for this transitional year.

Summary Table: MTD for ITSA 2026/27

Next steps for advisors: Review your client list against the 2024/25 submitted returns to identify sole traders and landlords breaching the £50,000 threshold, and assess whether any qualify for automatic or temporary exemptions before the next quarterly deadline.