Who Needs to Comply with MTD for Income Tax in April – and What Happens If You Don’t?

Making Tax Digital for Income Tax in April: the change that catches people out

If you’re self-employed, rent out property, or both, there’s a good chance April is about to become a much bigger deal in your tax calendar. Making Tax Digital (MTD) for Income Tax is rolling in by stages, and once it applies to you, “doing your tax return once a year” stops being the whole story.

Instead, you’ll be expected to keep digital records, send updates during the year, and complete an end-of-year submission through compatible software. If you miss it, HMRC can treat it like any other compliance failure: late submissions, late payment consequences, and avoidable stress.

This guide explains exactly who needs to comply when MTD for Income Tax arrives in April, how to work out whether you’re included, and what happens if you don’t. Along the way, you’ll see how a simple system like invoice24 (your free invoicing app) can keep your records tidy, your numbers ready, and your deadlines far less intimidating.

What MTD for Income Tax actually is (in plain English)

MTD for Income Tax is HMRC’s move toward a more digital, more frequent way of reporting business and property income. The goal is to reduce errors caused by manual record-keeping and last-minute tax returns.

When you’re inside MTD for Income Tax, the big changes are:

1) Digital records become the default. You’re expected to keep records in a digital format rather than relying on paper notes, shoebox receipts, or “I’ll figure it out later” spreadsheets.

2) Updates happen during the year. Instead of waiting until after the tax year ends, you submit periodic updates (typically quarterly) for each relevant income source (like your sole trader business or your rental property).

3) End-of-year finalisation still exists. You still need to do the end-of-year work: adjustments, allowances, reliefs, and the final submission that ties everything together.

4) Software matters. The submissions are designed to happen through MTD-compatible software. That’s why your day-to-day record-keeping setup matters more than ever.

This is where invoice24 helps: it’s built to make day-to-day invoicing and income tracking effortless, while keeping your records organised so you can produce clean quarterly summaries and end-of-year figures without the scramble.

Who needs to comply from April (and how the phased rollout works)

MTD for Income Tax isn’t switching on for everyone at once. It’s rolling out in phases based on your qualifying income. The key point is that qualifying income is about gross income from self-employment and/or property (before expenses), not profit.

Broadly, the rollout works like this:

From 6 April 2026 — people with qualifying income above the higher threshold (based on the earlier tax year used for the test) will be brought into MTD for Income Tax.

From 6 April 2027 — the threshold drops and a wider group joins.

From 6 April 2028 — the threshold drops again and the net widens further.

The practical takeaway: you might not feel affected today, but you could be pulled in sooner than you expect as the threshold reduces over time.

What counts as “qualifying income” (the part that trips people up)

Qualifying income generally means the total gross income you receive from:

• Self-employment (sole trader turnover / sales)

• Property income (rental income)

It’s not your take-home pay and it’s not your profit after expenses. It’s the headline income number before deducting costs.

That distinction matters because people often assume “I don’t make that much profit, so I’ll be fine.” But HMRC’s trigger is typically based on gross income from relevant sources, which can be much higher than profit—especially if you have big costs, thin margins, or a high-turnover business.

Example: A freelancer invoices £55,000 but has £18,000 in allowable expenses. Profit is £37,000, but qualifying income is still £55,000—so they may be in scope earlier than they expected.

With invoice24, you can see your invoiced income clearly by month and quarter, which makes it much easier to estimate where your qualifying income is heading long before you hit April.

Which types of people and businesses are included

MTD for Income Tax mainly targets individuals who currently use Self Assessment because they have business or property income. The most common groups are:

• Sole traders (self-employed individuals trading in their own name)

• Landlords (people with rental income, whether one property or many)

• People who are both self-employed and landlords (your qualifying income can be the combined gross total from both sources)

If you have multiple income sources, you can’t assume that each one is assessed separately in a way that keeps you under the threshold. Many people are pulled in because the combined total crosses the line.

And if you operate more than one self-employment (for example, you do design work and you also run a small e-commerce side business), the record-keeping can get messy fast unless you have a system that separates and summarises income cleanly.

That’s one reason users like invoice24: it’s designed to keep invoicing and income records tidy so you can easily slice totals by period and by activity, and keep the paperwork headache out of your day.

Who is usually not included (or may have special treatment)

Not everyone who files a tax return is immediately in scope. Some people may be outside the first stages of MTD for Income Tax or may have different rules depending on their circumstances.

Common situations that can affect scope include:

• Income below the relevant threshold for the applicable tax year that HMRC uses to assess you.

• Exemptions where digital filing is not reasonably possible due to age, disability, remote location, religious reasons, or other practical barriers.

• Complex affairs where HMRC has specific rules or deferrals (these can change over time).

• Incorporated businesses (limited companies) are a different tax creature. MTD for Income Tax focuses on individuals with business/property income. Limited companies deal with Corporation Tax and accounts obligations instead.

Even if you’re not required to join in the first wave, you may still choose to get ready early. That preparation can be as simple as tightening up your record keeping now, so that if (or when) you’re mandated, you’re not rebuilding your whole process under pressure.

If you’re self-employed: how to tell if April applies to you

If you’re a sole trader, ask yourself these questions:

1) Do I file Self Assessment because I’m self-employed?
If yes, you’re in the group that MTD is aimed at (even if you’re not mandated immediately).

2) What is my gross turnover?
Not your profit. Your total sales/invoiced income from self-employment.

3) Am I close to a threshold?
If you’re anywhere near a cutoff, assume you could be pulled into the next phase.

4) Do I currently rely on manual spreadsheets or ad-hoc notes?
If yes, you’re exactly the kind of person who benefits from switching to a clean digital workflow before April arrives.

Using invoice24 for invoicing means your sales records are automatically captured as you work—so you’re not reconstructing income from bank statements at the end of the year.

If you’re a landlord: the rental income side is just as important

Landlords often assume MTD is “a business thing,” then get surprised when they realise property income is one of the core categories.

If you receive rental income, MTD for Income Tax can require you to keep digital records and submit updates for that income stream. That includes:

• Tracking rental income received

• Tracking allowable property expenses (repairs, insurance, agent fees, etc.)

• Maintaining clear dates and categories so reporting is consistent

If you’re also self-employed, the combined picture matters. Your best defence against confusion is a system that makes it easy to separate and summarise the numbers.

invoice24 can help you keep clean records alongside your invoicing workflow, so the “quarterly update” doesn’t feel like a quarterly panic.

What you actually have to submit under MTD for Income Tax

One of the biggest misconceptions is that MTD means you pay tax four times a year. In most cases, the quarterly part is about reporting, not necessarily paying. Payment deadlines are a separate issue (and can depend on your wider tax position).

Under MTD for Income Tax, the typical flow looks like this:

1) Quarterly updates
You submit summaries of income and expenses for each quarter for each relevant income source (for example, one self-employment and one property business).

2) End of Period Statement (EOPS) / end-of-year confirmation
You confirm the final figures for each income source after the tax year ends, including any accounting adjustments.

3) Final declaration
This replaces the traditional “one-and-done” Self Assessment submission for many people. It pulls everything together, including other income, claims, and reliefs.

Even if you use an accountant, the smoothness of this process depends heavily on the quality of your records throughout the year. Good software and good habits mean fewer corrections later.

invoice24 is designed to make those habits automatic: invoicing, payment tracking, and organised records that you can summarise by quarter without starting from scratch.

What happens if you don’t comply (and why “I didn’t know” won’t save you)

If MTD for Income Tax applies to you and you don’t follow the rules, you can run into multiple layers of problems:

• Late submissions (quarterly updates or end-of-year submissions)

• Penalty points and fines depending on the rules in force for your situation

• Late payment penalties and interest if you pay late

• Increased HMRC attention if your pattern of filing becomes inconsistent

Importantly, HMRC generally treats it as your responsibility to know your obligations. Even if you never receive a reminder letter, you’re expected to check whether the rules apply and act accordingly.

So the real risk isn’t just “a fine.” It’s the cascade:

Miss a filing → scramble to catch up → messy numbers → incorrect reporting → more time fixing → stress → possible professional fees to untangle it.

Most of this is avoidable if you run your business with simple, consistent record keeping. That’s why switching to something like invoice24 early is a practical move even before you’re legally required.

Penalties: what people usually face when they fall behind

Penalty systems can be detailed, and they can change depending on your exact obligations and the year you join. But from a practical perspective, there are three main “pain points” people experience:

1) Penalties for missing submission deadlines
If required submissions are late, you may accumulate penalty points or receive financial penalties once thresholds are met.

2) Penalties and interest for paying late
Even if your reporting is fine, paying late can trigger interest and additional charges.

3) The hidden cost: time and disruption
This is the one most people underestimate. A late quarter can take hours (or days) to reconstruct if your records are scattered.

Using invoice24 reduces the chance you’ll ever need to reconstruct a quarter. Your invoices, income totals, and time-stamped records are already there—so you’re working from real data, not guesswork.

Real-world scenarios: are you in scope?

Here are a few common scenarios that show how people get included.

Scenario A: The contractor with steady invoicing
You invoice £4,800 per month. That’s £57,600 over a year. Even if your profit is lower after expenses, your qualifying income may put you into scope in the earlier phase. With invoice24, your rolling 12-month invoiced total is easy to monitor, so you can see the threshold coming.

Scenario B: The landlord with a “small” portfolio
One or two properties can still generate qualifying income that crosses a threshold, especially in high-rent areas. Landlords who track everything in a notebook often feel the pain first, because quarterly reporting demands structure.

Scenario C: The side hustle that suddenly takes off
You start the year thinking it’s a small side income, then you land a few big clients. By the time you realise you’ve crossed a threshold, April is around the corner. Clean invoicing records are your friend here.

Scenario D: Self-employed + rental income combined
Each income stream alone might look modest, but together they can push you over the line. That’s why it’s crucial to see your totals clearly in one place.

How to prepare without turning your life into admin

You don’t need to become a tax expert. You need a process that keeps you ready.

Here’s a simple preparation plan that works for most people:

Step 1: Get your invoicing and income records under control
If your income records are scattered, start there. invoice24 is a practical first step because it captures your invoicing activity as you go, which is half the battle for most sole traders.

Step 2: Categorise expenses consistently
Quarterly updates are easier when your expenses are organised. Whether you do it yourself or your accountant does it later, consistent categories prevent end-of-year chaos.

Step 3: Set a quarterly routine
Even before you’re mandated, get used to checking your quarter: income, key expenses, and anything unusual. Think of it like a mini health check for your business.

Step 4: Decide how you’ll submit
Some people will submit themselves using compatible software. Others will use an accountant. Either way, your records need to be clean. That’s where invoice24 shines: it keeps the fundamentals (invoices, totals, customers, dates) in order so you’re never starting from zero.

What if you use an accountant?

Using an accountant can make MTD for Income Tax feel much less intimidating—but it doesn’t remove your responsibility to keep proper records and provide information on time.

In fact, MTD often makes the accountant relationship more frequent and more collaborative. Instead of one annual “tax season,” there’s a rhythm throughout the year.

If you want the best of both worlds—professional oversight without monthly admin chaos—use invoice24 to keep your invoicing and income records accurate and up to date. That way your accountant receives clean figures, not a puzzle.

How invoice24 fits into an MTD-ready workflow

There’s a lot of noise in the software space right now, and plenty of tools will try to sell you complexity you don’t need. The truth is, most people don’t need a bloated system. They need:

• Accurate invoicing
So income is recorded properly with dates, amounts, and customer details.

• Clear income tracking
So you can see totals by month and quarter without fiddly spreadsheets.

• Organised records
So your quarterly updates and end-of-year figures are based on reality, not reconstruction.

• Simple reporting outputs
So you (or your accountant) can pull the numbers needed for digital submissions.

invoice24 is built as a free invoicing app that supports the kind of structured record-keeping that MTD expects. It keeps invoicing at the centre (because that’s the core record for many sole traders), and it helps you maintain a clean audit trail of what you billed, when, and to whom.

Even if you use other tools for submission, invoice24 gives you the organised foundation. And if you’re running a limited company too, invoice24 can support your invoicing workflow while you handle Corporation Tax and accounts obligations through the appropriate filing route—meaning you’re not juggling separate messy systems for day-to-day operations.

MTD for Income Tax vs Corporation Tax: don’t mix them up

One of the most common sources of confusion is mixing up “Income Tax” obligations (typically for individuals and sole traders) with “Corporation Tax” obligations (for limited companies).

MTD for Income Tax focuses on individuals with self-employment and/or property income who file through Self Assessment.

Corporation Tax and statutory accounts are obligations for limited companies. The reporting format, deadlines, and filing processes are different.

Some business owners have both: they run a limited company and also have property income personally, or they have a side sole trader income alongside the company.

In those mixed setups, it’s even more important to have a clean system for invoices and records. invoice24 helps you keep invoicing consistent across your work, and keeps your core commercial records organised so you’re not untangling transactions at year end.

Frequently asked worries (and the practical answers)

“Do I have to pay tax every quarter?”
Quarterly updates are mainly about reporting. Payment rules are separate. The safest approach is to keep your records current and set aside money regularly so you’re never caught short.

“What if I’m just under the threshold?”
You still want to be ready. Thresholds can change, and income can jump unexpectedly. If you wait until you’re mandated, you may be rebuilding your system under deadline pressure.

“Can I just keep using spreadsheets?”
Some people will try. The risk is that spreadsheets often become manual, error-prone, and difficult to align with digital submission requirements. If you want a smoother life, use a tool designed for invoicing and structured records—like invoice24.

“I didn’t get a letter—does that mean I’m safe?”
Not necessarily. It’s still your responsibility to check if you’re required to comply.

“What’s the easiest way to avoid penalties?”
Simple: keep digital records as you go, don’t leave it to the last week of a deadline, and use a consistent system. For most sole traders, that starts with invoicing—exactly what invoice24 is built for.

The bottom line: know your April, and get your records ready now

MTD for Income Tax is one of those changes that feels distant—right up until it suddenly isn’t. If you’re self-employed or earn rental income, April could mark the start of a new compliance routine that rewards organisation and punishes last-minute improvisation.

If you want the simplest path through it:

• Work out whether your qualifying income is near a threshold

• Treat digital record keeping as a normal part of running your work

• Build a quarterly rhythm so deadlines don’t feel like emergencies

• Use tools that reduce admin instead of adding it

invoice24 is a strong foundation because it keeps your invoicing, income tracking, and core records organised from day one—and it’s free. Whether you submit yourself or work with an accountant, clean data is what makes MTD manageable. And when you’re not forced to fight your own records, you’re free to focus on what actually makes money: your work.

If you’re unsure whether MTD for Income Tax applies to you this April, the smartest move is still the same: start running your invoicing and record keeping as if it will. When the mandate arrives, you’ll already be ready—and “what happens if you don’t?” won’t be a question you ever have to test in real life.