MTD Compliance Checker
Check if Making Tax Digital affects you and calculate potential penalties for late filing or payment.
MTD Readiness Assessment
Gross income from self-employment before expenses
Gross rental income before expenses
Stay ahead of HMRC changes
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Important Disclaimer
This tool provides indicative calculations only and does not constitute financial, accounting, tax, or legal advice. The accuracy of results depends on the accuracy of information you provide. Consult a qualified professional for complex situations.
Overview
Making Tax Digital for Income Tax (MTD ITSA) is HMRC's biggest change to Self Assessment in a generation, and it starts on 6 April 2026. From that date, sole traders and landlords with qualifying income over £50,000 must keep digital records and file quarterly updates through MTD-compatible software instead of a single annual return. The threshold drops to £30,000 from April 2027 and £20,000 from April 2028, so most self-employed people and landlords will be in scope within three years. Qualifying income is your combined gross income from self-employment and property before expenses — not your profit. The checker tells you when you're mandated, whether your software setup is compliant, and what HMRC's new points-based penalties could cost you.
Worked Example (2026/27)
### Worked Example: Sole Trader with Rental Income
**Inputs**: a self-employed consultant with £42,000 of gross self-employment income and £12,000 of gross rental income in the 2024/25 tax year.
**Am I mandated?** 1. Qualifying income: £42,000 + £12,000 = £54,000 (gross, before expenses) 2. £54,000 > £50,000 → **mandated from 6 April 2026** 3. Note that profit is irrelevant — even if expenses reduce taxable profit to £20,000, the gross test is what counts
**What changes**: four quarterly updates a year (deadlines 7 August, 7 November, 7 February, 7 May) plus a final declaration, all filed from MTD-compatible software with digital links — no retyping figures between systems.
**Penalty exposure**: each late quarterly update earns 1 penalty point; at 4 points a £200 penalty is charged, plus £200 for every further late filing until 12 months of on-time filing resets the points.
2026/27 Rates & Thresholds
| Item | Value |
|---|---|
| Mandation from 6 April 2026 | Qualifying income over £50,000 |
| Mandation from April 2027 | Over £30,000 |
| Mandation from April 2028 | Over £20,000 |
| Quarterly update deadlines | 7 Aug, 7 Nov, 7 Feb, 7 May |
| Penalty points threshold (quarterly filers) | 4 points → £200, then £200 per late filing |
| Points reset | 12 months of on-time filing (24 for annual) |
| Late payment interest | Bank of England base rate + 2.5%, charged daily |
| Limited companies | Not yet in scope — MTD for Corporation Tax has no confirmed date |
Getting Ready: the Critical Checklist
- Sign up for MTD for Income Tax on your HMRC account
- Switch to MTD-compatible software (Xero, Sage, QuickBooks, FreeAgent, or another HMRC-recognised product — check your specific plan includes MTD filing)
- Move all business records to digital form — paper-only records are no longer compliant
- Set up digital links between systems — copy/paste and retyping between a spreadsheet and filing software breaks the rules
- Authorise your software to connect to HMRC via the MTD API
Spreadsheets remain allowed for record-keeping, but only when digitally linked to bridging or filing software.
The First Year: Soft Landing, Not an Exemption
HMRC has signalled a light-touch approach to penalties in the first year for those making reasonable efforts to comply. Points still accrue, and late-payment interest at base rate + 2.5% still runs from day one — so treat the transition year as practice for full enforcement, not a holiday. The first quarterly deadline for the April 2026 cohort is **7 August 2026**.
Common Mistakes HMRC Penalises
- Testing the threshold against profit — mandation is based on gross qualifying income before expenses.
- Forgetting to combine income sources — self-employment and property income are added together for the test.
- Keeping records in a spreadsheet and retyping figures into filing software — the digital-link requirement forbids manual transfer.
- Assuming an entry-level software plan includes MTD filing — several don't.
- Ignoring the scheme because you're under £50,000 — the £30,000 (2027) and £20,000 (2028) phases capture most sole traders and landlords.
- Missing that each income source needs its own quarterly figures, not one combined set.
When to Seek Professional Advice
Talk to an accountant if your income hovers near a threshold (the mandation test uses prior-year figures and the answer isn't always obvious), if you have multiple property or trading businesses, or if you use an agent — they need digital authorisation in place before the first quarterly deadline. Anyone claiming an exemption (religious grounds, digital exclusion, age or disability) must apply to HMRC and should not assume it will be granted.
Frequently Asked Questions
Who has to use Making Tax Digital for Income Tax?+
From 6 April 2026, sole traders and landlords with qualifying income (self-employment plus property) over £50,000 must comply. The threshold drops to £30,000 from April 2027 and £20,000 from April 2028. Limited companies are not yet included — MTD for Corporation Tax has no confirmed start date.
What counts as qualifying income?+
Qualifying income is the combined gross income from all self-employment and property businesses before expenses. It does not include employment income, pensions, savings interest, or dividends — and because it is a gross test, low profits don't take you out of scope.
Can I still use spreadsheets under MTD?+
Spreadsheets can be used for record-keeping, but they must be digitally linked to MTD-compatible submission software. You cannot manually retype figures from a spreadsheet into HMRC systems — the data must flow digitally end to end.
What is the penalty points threshold for quarterly filing?+
For quarterly filers the threshold is 4 points. Each late quarterly update adds 1 point; once you reach 4 points a £200 fixed penalty is charged, plus £200 for every subsequent late submission until you reset your points by filing on time for 12 consecutive months.
How do I reset my penalty points?+
File on time for a continuous compliance period — 12 months for quarterly filers, 24 months for annual filers — and submit any outstanding returns from the previous 24 months. Points then reset to zero.
What software is MTD-compatible?+
HMRC maintains a list of recognised software; major providers include Xero, Sage, QuickBooks, and FreeAgent. Check that your specific plan includes MTD filing — some entry-level plans do not. The MTD Compliance Checker can assess your software readiness.
Is there a soft landing period for MTD ITSA?+
HMRC has indicated a light-touch approach for the first year for those making reasonable efforts to comply. Penalty points still accrue and late-payment interest still runs, so it is leniency for reasonable excuses during transition — not a formal exemption from filing on time.
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