Making Tax Digital for income tax has been introduced by the UK Government to streamline and modernise the tax reporting process for individuals in receipt of self-employment income or property income. This represents the next phase of Making Tax Digital originally announced in 2015 and following the previous implementations for VAT in April 2019.
HMRC have acknowledged that changing the system will take some time to get used to however their goal is to provide taxpayers with greater oversight of their finances and estimated tax liabilities during the year so they are more prepared come year end. They also hope to promote better record keeping and reduce errors.
We appreciate that taxpayers may not welcome the news of additional reporting however this guide explains who is impacted by the Making Tax Digital for income tax regime, what you must do and the key dates.
If you would like to discuss Making Tax Digital for income tax and how this impacts you, please contact us at Expat Tax Solutions.
Who Is Impacted By Making Tax Digital For Income Tax?
You will need to use Making Tax Digital for income tax if you are self-employed or in receipt of property income and your ‘qualifying income’ is in excess of £20,000. This is defined as your total gross income from both self-employment and rental income before the deduction of qualifying expenses.
For example, if you receive £24,000 per year of rental income and £30,000 per year of self-employment turnover, your ‘qualifying’ income is £54,000.
The date from which you are required to use Making Tax Digital for income tax depends on how much qualifying income you had in the previous tax year as follows:
- If your qualifying income was over £50,000 in the 2024/25 tax year, you will need to use Making Tax Digital for income tax from 6 April 2026.
- If your qualifying income is over £30,000 in 2025/26, you will need to use Making Tax Digital for income tax from 6 April 2027.
- If your qualifying income is over £20,000 in 2026/27, you may need to use Making Tax Digital for income tax from 6 April 2028 however the Government are currently confirming their plans regarding this threshold.
You should therefore review your 2024/25 UK tax return (due for filing by 31 January 2026) to calculate your ‘qualifying income’ and determine whether you need to use Making Tax Digital for income tax from 6 April 2026.
There are some additional exemptions to the Making Tax Digital for income tax rules including if you:
- Are Digitally Excluded – This is where it is not reasonable for you to keep digital records due to your age, health, disability, religious beliefs or access to the internet. You can apply for a digital exclusion from HMRC here.
- Do not have a National Insurance Number.
- Expect to include the SA109 Residence Pages on your tax return. This may be the case if you are non-resident or claiming the FIG Regime.
If you meet the conditions of Making Tax Digital for income tax from 6 April 2026, you should make arrangements as soon as possible to ensure you are prepared for the additional reporting requirements explained below. To find out how we can support, contact us at Expat Tax Solutions.
What Do I Need To Do Under Making Tax Digital For Income Tax?
If you meet the conditions of Making Tax Digital for income tax from 6 April 2026, you will need to file quarterly returns to HMRC by the following dates:
| Period | Filing Deadline |
|---|---|
| Quarter 1: 6 April 2026 – 5 July 2026 | 7 August 2026 |
| Quarter 2: 6 July 2026 – 5 October 2026 | 7 November 2026 |
| Quarter 3: 6 October 2026 – 5 January 2027 | 7 February 2027 |
| Quarter 4: 6 January 2027 – 5 April 2027 | 7 May 2027 |
Making Tax Digital for income tax has also introduced a new penalty regime for late payments not paid by the payment deadline of 31 January. The penalties are:
- 0-15 days late: No penalty
- 16 days late: 3% of the tax outstanding (increasing to 4% from 6 April 2027)
- 31 days late: 3% of the tax outstanding (increasing to 4% from 6 April 2027)
- 31+ days late: Additional interest at 10% per year is payable on the tax outstanding.
The above are in addition to HMRC’s standard late payment interest which starts to accrue from 31 January.
It is therefore essential that you are aware of your reporting obligations under Making Tax Digital for income tax and act early to ensure you are prepared.
The quarterly returns due under Making Tax Digital for income tax should include details of your income and expenses in the period to give HMRC a real-time oversight of your business and to help calculate your expected UK tax liability in real time. HMRC recommend that invoices and expenses are added in real time to reduce the reporting obligation at quarter end however they have not mandated a method for reporting other than the quarterly return deadlines outlined above.
You do not need to pay any tax by the above deadlines and you will still need to file a self-assessment tax return and pay the relevant balancing payment by 31 January following the end of the tax year.
How Do I File Quarterly Returns Under Making Tax Digital For Income Tax?
HMRC have not directly produced any software to enable individuals to keep records under the Making Tax Digital for income tax regime however they have produced a list of free and paid software available from third parties here. There are a variety of options including those available on PC or smartphone. You or your tax advisor should have the relevant software necessary to make quarterly updates to HMRC in line with the deadlines outlined above.
Are There Penalties For Late Or Incorrect Quarterly Returns?
Making Tax Digital For Income Tax: Late Filing Penalties
Making Tax Digital for income tax has introduced a new penalty regime and there are penalties for late submission of quarterly and annual returns however the new regime operates on a points based system designed to penalise repeat offenders and not punish one-off late filings.
From 6 April 2027, taxpayers will receive one penalty point per late submission be that either a quarterly return or annual return. Once the taxpayer receives four points, they will receive a £200 penalty. Every additional late submission while the taxpayer has at least four points will also result in a £200 penalty.
Penalty points are reset to zero when:
- All submissions have been made on or before the due date in the previous 12 months; and
- All submissions during the preceding 24 months have been received by HMRC.
Making Tax Digital For Income Tax: Late Payment Penalties
Making Tax Digital for income tax has also introduced a new penalty regime for late payments not paid by the payment deadline of 31 January. The penalties are:
- 0-15 days late: No penalty
- 16 days late: 3% of the tax outstanding (increasing to 4% from 6 April 2027)
- 31 days late: 3% of the tax outstanding (increasing to 4% from 6 April 2027)
- 31+ days late: Additional interest at 10% per year is payable on the tax outstanding.
The above are in addition to HMRC’s standard late payment interest which starts to accrue from 31 January.
It is therefore essential that you are aware of your reporting obligations under Making Tax Digital for income tax and act early to ensure you are prepared.
Making Tax Digital For Income Tax: Incorrect Returns
As with all submissions to HMRC, reasonable care should be taken when preparing and submitting quarterly returns. If you miss some income or expenses from a quarterly return, HMRC have advised that these can be included on your next quarterly return and you should not expect a penalty from HMRC if reasonable care has been taken.
HMRC may apply penalties if they deem that reasonable care has not been taken.
Making Tax Digital For Income Tax FAQs
Does Making Tax Digital for income tax apply to me?
If your total gross rental income and self-employment income for 2024/25 exceeded £50,000 then you will need to file quarterly returns from 6 April 2026.
Do I need to pay four tax bills per year?
No. Although you need to file quarterly returns, you only pay your tax liability once by 31 January following the end of the tax year as was the case prior to Making Tax Digital for income tax.
Can I opt out of Making Tax Digital for income tax?
No, you cannot opt out. If you meet the Making Tax Digital for income tax qualifying conditions then you must file quarterly returns however you may be eligible for some exclusions.
How do I file Making Tax Digital for income tax quarterly returns?
You will need an advisor or specialist software to record and submit income and expenses under Making Tax Digital for income tax.
Get Expert Help With Making Tax Digital For Income Tax
If you want to understand your obligations under Making Tax Digital for income tax, our experts can help. Schedule a free no-obligation consultation to receive expert advice from a Chartered Tax Advisor.