Use gross income before expenses. PAYE salary and pension are excluded, don't include them.
If you are self-employed in the UK, whether you are a freelance designer, a plumber, a consultant, a personal trainer or a market trader. Making Tax Digital for Income Tax applies to you. MTD came into force on6 April 2026, and the first quarterly deadline is 7 August 2026.
This guide covers exactly what MTD means for sole traders: what income counts, what the deadlines are, what happens if you miss them, and which software actually works for self-employed people.
Your qualifying income for MTD is your gross self-employment turnover. the total you earned before deducting any business expenses. This is the same figure you report on your Self Assessment as trading income.
Business expenses, tools, travel, phone, home office, professional subscriptions. all reduce your taxable profit, but they donot reduce your qualifying income for the MTD threshold. This catches many sole traders by surprise.
| Phase | When | Threshold | Who |
|---|---|---|---|
| Phase 1 | April 2026. LIVE NOW | £50,000+ | Sole traders and landlords above £50k |
| Phase 2 | April 2027 | £30,000+ | Sole traders and landlords £30k–£50k |
| Phase 3 | April 2028 | £20,000+ | Confirmed in Spring Statement 2025 |
MTD for Income Tax applies to individuals. sole traders and landlords who file Self Assessment returns. If you trade through alimited company, your company pays Corporation Tax, not Income Tax. MTD ITSA does not apply to limited companies, and HMRC confirmed in late 2025 that MTD for Corporation Tax will not be introduced.
If you are in the process of incorporating, your sole trader MTD obligation ends on the date of incorporation. You may need to file a final quarterly update up to that date.
Many sole traders have more than one income stream. All self-employment income is combined for the MTD threshold. If you freelance as a web developer and also sell crafts on Etsy, both gross amounts add together.
| Quarter | Period covered | Deadline | 2026–27 soft landing |
|---|---|---|---|
| Q1 | 6 Apr – 5 Jul 2026 | 7 August 2026 | No penalty points |
| Q2 | 6 Jul – 5 Oct 2026 | 7 November 2026 | No penalty points |
| Q3 | 6 Oct – 5 Jan 2027 | 7 February 2027 | No penalty points |
| Q4 | 6 Jan – 5 Apr 2027 | 7 May 2027 | No penalty points |
| Final Declaration | Full 2026–27 year | 31 January 2028 | Not soft-landed |
The soft landing means no penalty points for late quarterly updates in 2026–27. But late payment interest still applies from day one if you owe tax. And the 7 August 2026 deadline is closer than most people realise.
A quarterly update is a summary of your income and expenses for that three-month period, submitted through your software. It is not a tax return. It does not trigger a payment. Think of it as telling HMRC your running totals. the final reckoning happens in the Final Declaration in January.
Most people find that once they have their software set up and their bank connected, a quarterly update takes 15–30 minutes. The effort is in the setup, not the submissions.
HMRC requires digital records of all business income and expenses. For sole traders this means:
Paper records are not acceptable under MTD. You must keep digital records in HMRC-approved software, spreadsheets with compliant bridging software, or another HMRC-recognised digital format.
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