Who has to use MTD for Income Tax
You are in scope if your qualifying income is over the threshold for the tax year being tested and you are not exempt. Qualifying income is the total income from self-employment and property before expenses, taken from the tax return you submitted in the previous tax year.
Rental income counts at the amount received, before you take off mortgage interest, repairs or any other cost of letting. The test is on turnover, not on profit.
| Tax year tested | Threshold | Starts |
|---|---|---|
| 2024-25 | over 50,000 pounds | 6 April 2026 |
| 2025-26 | over 30,000 pounds | 6 April 2027 |
| 2026-27 | over 20,000 pounds | 6 April 2028 |
Qualifying income of 20,000 pounds or less is an automatic permanent exemption. The thresholds are set in law by SI 2026/336 regulation 27, in force 1 April 2026.
All your UK properties are one property business
Every UK property you let is treated as a single UK property business, whether it is a flat, a house or a room. You do not test the threshold property by property, and you do not send a separate set of updates for each one.
All foreign properties are treated the same way, as one foreign property business. The practical effect is that one set of category totals covers every UK property you let in that update period.
What counts towards the threshold and what does not
Self-employment income and property income are added together before the threshold is tested, so a modest trading profit can tip you over when the rent is included. Several items are left out of the calculation entirely.
- Employment income through PAYE
- A partnership share held as an individual partner
- Dividends
- State and private pensions
- Qualifying care relief
- Basis period reform transition profits
- One-off transactions in UK land in a single tax year
Partnerships are not in scope yet, and no start date has been published. If you receive income that does not count, it still belongs on your tax return, but it does not push you towards the threshold.
When rental income and a trade are both in play
If you run a trade as well as letting property, the two are added together to test the threshold. That can bring you in even when each source on its own sits below the figure.
You sign up for each income source separately if you have more than one. Sign-up does not ask about your other income sources or gains; those are added in compatible software before the tax return is submitted.
Missing a deadline costs one penalty point, not one per business, even when several updates are late on the same date.
How the four quarterly updates work
Each update is a set of totals by income and expense category, cumulative from 6 April. It is a summary, not a tax return, and HMRC receives the category totals rather than the individual transactions. The categories are the same income and expense categories used in Self Assessment.
| Period covered | Deadline |
|---|---|
| 6 April to 5 July | 7 August |
| 6 July to 5 October | 7 November |
| 6 October to 5 January | 7 February |
| 6 January to 5 April | 7 May |
You can send from the end of the period up to the deadline, or up to 10 days before the period ends if you expect no further transactions. After each update you can see an estimate of your tax bill in your software or in HMRC online services.
Calendar periods and the fourth update
Software defaults to an accounting period aligned to the tax year, 6 April to 5 April. If your accounting period runs 1 April to 31 March, you select calendar periods before the first update. The deadlines are the same either way, and the accounting period cannot be changed after the first quarterly update has been sent.
The fourth update may need resending if joint property expenses, or Rent-a-Room relief, are claimed after the tax year ends. That happens before tax adjustments are made. The tax return itself is submitted after the tax year, and the tax is paid by 31 January.
Records and digital links
A digital record is a record of income or an expense created and stored in compatible software. Keep digital records for at least 5 years after the 31 January submission deadline for the tax year, the same period as Self Assessment.
Once a record has been sent to HMRC in a quarterly update it must not be moved by hand, either within the software or between products. No writing it out in another cell or another product, and no cut and paste or copy and paste.
- Linked cells in spreadsheets, where a formula mirrors the source value
- Emailing a spreadsheet containing digital records so it can be imported
- Transferring records on a portable device such as a memory stick for someone to import
- XML and CSV import and export, and downloading and uploading files
- An automated transfer using an API
You can use more than one product, but only one product for each separate submission, and the records must be digitally linked between them.
Penalties in the first year
2026-27 has no penalty points for missing a quarterly update deadline. Points still apply to the tax return deadline, and digital records and quarterly updates are still required.
From tax years after 2026-27 the threshold is 4 points, then a 200 pound penalty, then a further 200 pound penalty each time another submission deadline is missed. Only one point is given per deadline, even with several businesses and several late updates. VAT penalty points are counted separately from MTD for Income Tax points.