Making Tax Digital: Key Rules and Deadlines

Making Tax Digital is changing the way some self-employed individuals and landlords report their income to HMRC. This article looks at the key rules, deadlines and penalties, and is particularly relevant to students preparing for the CII R03 exam. Read on for an overview of what the changes mean in practice.

This article is correct as at 27 October 2026 and is relevant to the 2026/27 examinable tax year.

Step by step, the dawn of a digital age has crept over the UK with the latest step encompassing tax.

Since 6 April 2026, sole traders and landlords with qualifying income over £50,000 have had to embrace Making Tax Digital (MTD); reporting income and expenses quarterly to HMRC, including a final tax return at the end of the year, using software compatible with HMRC (paper returns can no longer be made within MTD).

The aim of the government was to reduce the workload at the end of the year, but MTD has introduced extra admin, rapid deadlines and different financial consequences.

Who does MTD apply to?

MTD is being gradually introduced by the government based on qualifying income. Qualifying income relates to income from self-employment and rental properties only, before expenses, based on the tax return submitted in a previous tax year.

The first threshold was set at £50,000 although over the coming years the threshold is set to lower, which will greatly increase the number of people affected.

MTD start date according to qualifying income

What do taxpayers need to do?

Those who fall into the threshold must maintain digital records of their income and expenses which are to be submitted to HMRC using software that is compatible with theirs.

This can be done using an all-in-one software that records your income and expenses and submits it to HMRC. Alternatively, a combination of tools may be used; such as spreadsheets, or a banking app for records, alongside ‘bridging software’ to transfer the information to HMRC. The government’s website provides a software finding tool which lists HMRC approved products, which are either free or paid for depending on the range of needs.

Deadlines

MTD updates will come rapidly through the year and there are penalties if missed, so setting reminders is a helpful way to avoid consequences. While this may sound intimidating, most software will do much of the calculation and submissions. Crucially, however, at the end of the tax year, the taxpayer must finalise the figures from the year, include other relevant income and submit a tax return.

For 2026/27 the deadlines are:

• 7 August 2026
• 7 November 2026
• 7 February 2027
• 7 May 2027 

Penalties

Ignoring MTD could become an expensive mistake. MTD has introduced a points-based system for late submissions, meaning repeatedly missing deadlines will result in financial penalties.

For 2026/27, HMRC is not applying penalty points for the quarterly updates, but the updates still need to be completed before the tax return can be submitted at the end of the year.  If the tax return is late then a penalty point will be applied.

From 2027/28, taxpayers will receive a point for each missed quarterly update or tax return deadline. After four of these, a £200 fine will be issued, followed by another £200 penalty for each additional missed deadline or update. If taxpayers are below the four-point threshold, each point will be removed 24 months after the missed deadline.

Late payments, or payments not in full, also have financial consequences. A late payment penalty amount depends directly on how long it takes the taxpayer to pay what is owed.

What does this mean for those taxpayers affected?

Adaptation is crucial for taxpayers to avoid both unwanted stress and penalties.

Due to the quarterly nature of MTD, keeping up with records and submissions may make admin easier over the course of a year, rather than one overwhelming job at the end of the tax year. However, this may require a steep learning curve for many who currently rely on spreadsheets and paper records, or particularly a generation who struggle to adapt to the digital world as quickly as it overshadows them (although it is possible to apply for a ‘digitally excluded exemption’ if, for example, age, health conditions or disabilities prevent someone from using a computer or smartphone to keep digital records or submit them to HMRC).

In conclusion, Making Tax Digital is not about a new tax or necessarily paying more, it is about changing the behaviour of taxpayers and the frequency with which they interact with HMRC.  Over the coming years as the thresholds fall, many more self-employed individuals and landlords will need to adapt to this change of behaviour to avoid any unnecessary payments. Digital tax is here; it’s time for taxpayers to prepare and adapt.

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