Making Tax Digital for Income Tax

Gross income before expenses from self-employment and from property, added together. Employment income, dividends, pensions and savings interest do not count towards the threshold, although they are still reported in your final declaration.

Four quarterly updates for each business or property source, followed by one final declaration after the tax year ends. The final declaration replaces the self assessment tax return you file today.

Key submission dates for 2026/27:

• 7 August 2026: First quarterly deadline

• 7 November 2026: Second quarterly deadline

   

• 7 February 2027: Third quarterly deadline

   

• 7 May 2027: Fourth quarterly deadline

   

• 31 January 2028: Final declaration submission deadline

Taxpayers get points for late quarterly updates. A £200 financial penalty applies when you reach four penalty points. Separate late-payment penalties and interest apply to tax paid late. 

HMRC has introduced a transition period for 2026/27. They will not issue penalty points for late quarterly submissions in 2026/27. If you join in April 2027 onwards, penalty points will apply.

How the points system works

You get one penalty point for each missed quarterly submission. When you reach four points, you pay a £200 penalty. Each further missed deadline adds another £200 penalty.

• First missed deadline - 1 point warning

• Second missed deadline - 2 points

• Third missed deadline - 3 points

• Fourth missed deadline - 4 points. £200 fine. 

• Five or more missed deadlines - £200 fine for each subsequent late submission

However, this only cover late submission penalties. It doesn't protect you from penalties for incorrect records, or miscategorising income.

Because quarterly updates are cumulative, you correct the mistake in your next digital update. Your software adjusts the figures  before you file your Final Declaration. 

If your Final Declaration or tax return contains errors resulting in underpaid tax, standard HMRC inaccuracy penalties apply:

• Careless error penalty: Up to 30% of the lost tax.
• Deliberate error penalty: Up to 70% of the lost tax.
• Deliberate and concealed penalty: Up to 100% of the lost tax

No. You do not have to link your bank account to your software or HMRC, and linking is not a legal requirement. You can:

• Manually enter income and expenses
• Keep digital records in HMRC-approved software

Getting a business bank account (such as Nettle) and linking it to software can save a lot of time as it automatically imports transactions. 

No, you do not need to link your bank account. HMRC doesn't have direct, continuous access to your bank feeds. 

You must use compatible software to keep digital records and send summary updates. You can manually input income and expenses. Using a free business bank account that links to your software can streamline MTD by importing transactions.