If you are a sole trader and/or a landlord and your qualifying income on your 2025-26 tax return is above £30,000, before deducting expenses, you will need to:

Maintain digital records;

Submit quarterly summaries of your income and expenses to HMRC; and

File a tax return using HMRC recognised software.

If your qualifying income on your 2024-25 tax return was over £50,000, you should have been meeting the MTD requirements since April 2026, unless you are digitally or otherwise exempt.

The quarterly updates must be submitted by 7^th August, 7^th November, 7^th February and 7^th May. If you do not submit a quarterly update by the deadline you will receive a penalty point. Four penalty points will result in a £200 fine with each subsequent missed deadline incurring an additional £200 fine. You will need to complete a 12-month period of compliance and submit any outstanding quarterly updates and tax returns due in the previous 24 months to get rid of accumulated penalty points.

Individuals who joined MTD in the 2026-27 tax year will not incur penalty points for late submission of the first four quarterly updates. However, to comply with the new regulations:

you still have to submit all four quarterly updates;

you still need to keep digital records; and

late annual tax returns can still attract penalties.

The 'soft landing' on penalty points will end for the first group of mandated taxpayers in April 2027.

In Budget 2026 the Chancellor announced that the 12-month penalty waiver will also apply for taxpayers joining MTD for Income Tax for the first time in the 2027-28 tax year.

We have been preparing to help our clients navigate the new digital requirements for some time. We can help you ensure that you and your business are MTD-compliant.