Quick Answer
From 6 April 2026, anyone with qualifying income (self-employment or UK rental income) over £50,000 must file four quarterly income and expense summaries with HMRC each year. Your limited company salary and dividends do not count. The first quarterly update covers 6 April to 5 July 2026 and is due by 7 August 2026.
Who Must Submit MTD Quarterly Updates from April 2026?
MTD income tax quarterly reporting applies from 6 April 2026 to individuals with qualifying income over £50,000 in the 2024/25 tax year. Around 864,000 sole traders and landlords in the UK are affected by this first phase, according to HMRC. The threshold is based on gross income, not net profit.
For limited company directors, the position is more nuanced. Your company files Corporation Tax through the CT600 system, which is entirely separate from MTD for Income Tax. Your director salary (paid through PAYE) and your dividends from the company are both excluded from qualifying income. If salary and dividends are your only personal income, you are not required to use MTD for Income Tax. For a detailed breakdown of how MTD affects limited company directors specifically, see our MTD ITSA guide for limited company directors.
The group most likely to be caught as directors is those with UK buy-to-let property alongside their limited company. Rental income from property counts in full as qualifying income. A director with a portfolio generating £60,000 in gross rent each year is mandated from April 2026, even if every penny of their other income comes from their company. It is worth reviewing this as part of your annual tax review if you hold property alongside your limited company.
What Counts as Qualifying Income for MTD Quarterly Reporting?
Qualifying income for MTD for Income Tax is the combined gross figure from two sources only: self-employment income and UK property rental income. Both figures are measured before deducting any expenses.
- Included: gross self-employment turnover (sole trader income before any costs); gross UK property rental income (rent received before mortgage interest, letting fees, or maintenance costs).
- Excluded: director salary; dividends from a limited company; PAYE employment income; savings interest; pension income; capital gains; investment income; foreign income.
The gross income rule catches more people than expected. A landlord earning £60,000 in rent but spending £35,000 on mortgage interest, agents' fees, and repairs has a net profit of only £25,000, but gross rent of £60,000 means they are mandated. The threshold is on turnover, not what ends up in your pocket.
Worked example: agency director with rental income
A digital agency director draws £12,570 salary and £80,000 dividends from their limited company, plus owns two buy-to-let flats that generate £55,000 in gross annual rent. Their qualifying income for MTD purposes is £55,000: the rental income only. The salary and dividends are excluded. Because £55,000 exceeds the £50,000 threshold measured against the 2024/25 tax year, they are mandated for MTD quarterly reporting from 6 April 2026.
Making Tax Digital Income Tax Threshold
MTD Income Tax Threshold — Phase 2 (April 2027)
MTD Income Tax Threshold — Phase 3 (April 2028)
MTD Quarterly Reporting Deadlines for 2026/27
The MTD tax year runs from 6 April to 5 April and is divided into four quarters. For the 2026/27 tax year (the first mandated year for Phase 1), the quarterly update deadlines are fixed as follows:
- Quarter 1: 6 April 2026 to 5 July 2026, due by 7 August 2026
- Quarter 2: 6 July 2026 to 5 October 2026, due by 7 November 2026
- Quarter 3: 6 October 2026 to 5 January 2027, due by 7 February 2027
- Quarter 4: 6 January 2027 to 5 April 2027, due by 7 May 2027
After the four quarterly updates, you submit an End of Period Statement (EOPS) for each income source (self-employment and property separately) to confirm and finalise your figures. You then complete a Final Declaration by 31 January 2028. The Final Declaration is the direct replacement for the Self Assessment tax return. It is where you claim reliefs, add other income sources, and confirm your total tax liability for 2026/27. This is also when any balance of tax owed becomes due.
Your 2025/26 Self Assessment is not affected
If you were already filing Self Assessment, you still submit your 2025/26 return in the normal way by 31 January 2027. MTD quarterly reporting only applies from 6 April 2026, the start of the 2026/27 tax year. There is no overlap between the two systems.
What You Actually Submit Each Quarter
A quarterly update is not a tax return. You are submitting a simple income and expenses summary; HMRC describes it as “light touch.” No payment is triggered by submitting a quarterly update. The submission tells HMRC roughly where your income and expenses are tracking, so they can give you an in-year tax estimate, but nothing is owed or finalised until the Final Declaration.
Each income source is reported separately. If you have both self-employment income and rental income, you will have two quarterly reporting streams: one for trading income and one for property income. Both must be submitted for each quarter.
Within each quarterly update, you categorise income and expenses into the categories HMRC recognises. For self-employment these broadly follow the categories on the Self Assessment SA103 form. For property income they follow SA105. Your MTD software will present these categories; you are not expected to know the technical references. The key discipline is keeping your digital records up to date so the quarterly submission is straightforward.
Thinking about how your income sits overall? Our director salary calculator can help you model your salary, dividends, and any self-employment income to understand your total tax position across all income sources.
The Software You Need for MTD Quarterly Submissions
MTD for Income Tax requires HMRC-recognised software. HMRC's own free filing tools (including its online Self Assessment service) do not support MTD quarterly submissions. You must use commercial MTD-compatible software, and it must connect digitally to HMRC's systems to make submissions directly.
The most widely used options among sole traders and landlords in the UK are:
- Xero: strong for self-employed people with more complex income, integrates well with bank feeds and property management tools.
- QuickBooks Self-Employed: simple UI, designed for freelancers and sole traders with straightforward income.
- FreeAgent: popular with contractors and agency founders; handles both self-employment and property income.
- TaxCalc and Sage: alternatives suited to those who already use these platforms for other compliance purposes.
Whichever software you choose, it must maintain your records in digital form throughout the year. You cannot keep paper records and enter them into software just before the quarterly deadline. The digital record-keeping requirement is continuous, not just at submission time.
The Penalty Framework: Why 2026/27 Is Your Grace Period
HMRC has confirmed a soft landing for the 2026/27 tax year: no penalty points will be issued for late quarterly updates during the first year of mandation. This is designed to give businesses time to adapt to the new system. The soft landing applies only to quarterly update filings, not to the Final Declaration or to late payment of tax.
From April 2027, the full penalty points system comes into force. Under this system, each late quarterly submission earns one penalty point. When you accumulate four points within a 24-month rolling period, HMRC issues a £200 fine. Points clear once you have submitted all outstanding returns and followed 24 months of on-time submissions. For most affected individuals, four late quarters in a row means a £200 fine: not per quarter, but once the threshold is hit.
The soft landing does not mean you should delay. Submitting your first quarterly update late means you miss the chance to establish good systems and habits before penalties apply. It also means HMRC's in-year tax estimates will be inaccurate, which can lead to unwelcome surprises at Final Declaration. Use 2026/27 to get your software connected, your record-keeping routine established, and your first submissions in on time.
Phase Dates: When the Threshold Drops Further
The £50,000 qualifying income threshold is not the permanent floor. HMRC has published the full rollout schedule:
- From 6 April 2026: qualifying income over £50,000: around 864,000 people.
- From 6 April 2027: threshold drops to £30,000, with a further 970,000 people joining.
- From 6 April 2028: threshold drops to £20,000, significantly broadening the scope.
If your qualifying income is currently between £30,000 and £50,000 (for example, a modest buy-to-let generating £35,000 in gross rent), you are not mandated now but will be from April 2027. Getting your software set up early and understanding the system before you are required to use it avoids a last-minute scramble.
If you run your agency as a limited company and also have contractor or freelance income alongside it, the IR35 landscape matters too. The IR35 guide for agency owners explains how contractor status interacts with income tax obligations.
How Alto Accounting Can Help
Alto Accounting is an ACCA registered practice working with UK agency founders, creative directors, and self-employed professionals who need to navigate MTD for Income Tax alongside their existing compliance obligations. We help clients choose the right MTD software, set up digital record-keeping workflows, and make sure quarterly submissions are on time and accurate.
If you are not certain whether you are caught by MTD quarterly reporting this year, or if you have rental income alongside your limited company and want to review your position before the 7 August deadline, book a free consultation and we can walk through your specific income sources with you.
Frequently Asked Questions
Do limited company directors need to submit MTD quarterly updates?
Most limited company directors do not. Your salary and dividends from the company are not qualifying income for MTD for Income Tax. However, if you also earn self-employment income or UK rental income that totals more than £50,000 gross, you are required to submit quarterly updates from April 2026. The test is based on your personal qualifying income, not your company's turnover.
What counts as qualifying income for MTD quarterly reporting?
Qualifying income is gross self-employment income (your sole trader turnover before expenses, not profit) and gross UK property rental income (rent received before deducting any costs). It does not include director salary, dividends, PAYE employment income, savings interest, pension income, investment returns, or capital gains. The £50,000 threshold applies to the combined gross figure from these two sources only.
When is the first MTD quarterly update deadline in 2026?
The first quarterly update for the 2026/27 tax year covers 6 April 2026 to 5 July 2026 and must be submitted by 7 August 2026. Subsequent deadlines are 7 November 2026, 7 February 2027, and 7 May 2027. After the fourth update, you submit an End of Period Statement (EOPS) and then a Final Declaration by 31 January 2028, which replaces the Self Assessment tax return for that year.
What happens if I miss an MTD quarterly update deadline?
For 2026/27, HMRC is applying a soft landing: no penalty points will be issued for late quarterly updates during the first year of mandation. This applies only to quarterly updates; late payment of the tax you owe and a late Final Declaration both carry full consequences from day one. From April 2027, the penalty points system applies in full: four late quarterly submissions in a 24-month period triggers a £200 fine.
What software do I need to file MTD quarterly updates?
You must use HMRC-recognised MTD-compatible software. Popular options include Xero, QuickBooks, and FreeAgent, all of which support MTD for Income Tax quarterly submissions. HMRC's free software tools do not support MTD for Income Tax. You need commercial software. Your software must connect digitally to HMRC, keep records in digital form, and submit your quarterly income and expenses summary directly.
I have rental income from a UK buy-to-let. Does MTD apply to me?
If your gross rental income (rent received before deducting mortgage interest, letting agent fees, or any other costs) exceeds £50,000 in 2024/25, you are mandated from 6 April 2026. If it is between £30,000 and £50,000, you are not required to start until April 2027. Below £30,000, you have until April 2028. The threshold is measured on gross rent, not net profit, so a property portfolio yielding £55,000 gross (but only £20,000 net after costs) is caught from April 2026.
What is the difference between a quarterly update and the Final Declaration?
A quarterly update is a light-touch summary of your income and expenses for that three-month period. It is not a tax return and does not trigger a payment. It simply keeps HMRC informed throughout the year. The Final Declaration is submitted after the tax year ends and is the equivalent of your Self Assessment tax return; it is where you claim reliefs, make adjustments, add other income, and confirm your final tax liability. For 2026/27, the Final Declaration is due by 31 January 2028.