Making Tax Digital thresholds and timelines – Small Business UK

March 26, 2026 / Liam Redmond /

With the first round of Making Tax Digital for Income Tax coming up in the new tax year, you might still be flummoxed by the whole thing. That’s why we’ve gathered up the deadlines, the thresholds and the penalties for non-compliance.

Making Tax Digital for Income Tax thresholds

£50,000 – businesses and landlords with a turnover of £50,000 or higher will need to comply with Making Tax Digital and use MTD-compatible software from April 6, 2026.

£30,000 – businesses and landlords with a turnover of £30,000 or higher will need to comply with Making Tax Digital and use MTD-compatible software from April 6, 2027.

£20,000 – businesses and landlords with a turnover of £20,000 or higher will need to comply with Making Tax Digital and use MTD-compatible software from April 6, 2028.

What deadlines do I need to know about?

The start of the new tax year – April 6 – is when these changes will be coming into place.

April 6, 2026 – businesses and landlords with a turnover of £50,000 or higher will need to comply with Making Tax Digital and use MTD-compatible software.

April 6, 2027 – businesses and landlords with a turnover of £30,000 or higher will need to comply with Making Tax Digital and use MTD-compatible software.

April 6, 2028 – businesses and landlords with a turnover of £20,000 or higher will need to comply with Making Tax Digital and use MTD-compatible software.

Changes to penalties

As mentioned in The Autumn Budget 2025, there will be no late submission penalties on the first four quarters for those joining Making Tax Digital.

Penalties start on a points basis. When you miss a tax submission deadline, you’ll be hit with one point. A £200 penalty will be issued once you’ve reached a certain number of points. For those submitting quarterly, it’ll be four points. An additional £200 penalty will apply every time you miss another penalty deadline.

As for late payment, the terms are ‘convoluted’, in a word. They’re summed up in the table below.

	Penalties for 2026 to 2027 tax year	Penalties for 2027 to 2028 tax year
Payment up to 15 days late	No penalty	No penalty
Payment 16-30 days late	3% of tax owed at day 15, or no penalty if it’s in your first year	4% of the tax owed at day 15, or no penalty if it’s in your first year
Payment 31 days or more late	3% of the tax owed at day 15 and 3% of tax owed at day 30 Plus, an annual rate of 10% per year on the outstanding amount, charged daily from day 31 until the tax is paid, or for up to two years	4% of the tax owed at day 15 and 3% of tax owed at day 30 Plus, an annual rate of 10% per year on the outstanding amount, charged daily from day 31 until the tax is paid, or for up to two years

Source: HMRC

If you’re struggling to make payments, penalties will stop accruing once a payment plan agreement is reached between you and HMRC.

There are additional penalties for failing to keep records under Making Tax Digital for Income Tax rules. If you don’t use MTD-compatible software, HMRC has the power to impose a penalty of up to £3,000 for each time you fail to keep or preserve adequate records.

You could also be fined for deliberately withholding information under MTD for Income Tax rules. So, if by failing to file a return, you’re withholding information that would allow HMRC to assess your liability to tax, then you’re held liable. The tax will be £300 minimum, increasing based on the severity of the information being withheld and whether it’s being deliberately hidden.

What’s the difference between gross income and profit?

Gross income includes the total cost of all revenues minus the cost of goods and services sold. It can also be called gross profit.

However, this is different from profit. Profit is the amount of money you have remaining after your business spend. This is made up of gross profit (described above), operating profit and net profit. Operating profit will tell you how much you’ve got after operational costs such as utilities and rent. Finally, net profit, which is what you have left after tax and all other costs.

What are the benefits of Making Tax Digital?

Improves efficiency, with all of your documents in one place – no more scrambling for paper receipts in a shoebox
Improves accuracy and confidence in your accounts. Pick up mistakes early by recording receipts and invoices as they come in
Makes it easier to keep up with cashflow, helping to keep plans and forecasts fluid. You can even refer to previous tax returns to check for inconsistencies and other information
MTD-suitable software can give you prompts about tax reliefs and allowances you may be eligible for

Making Tax Digital compliant software

The following providers offer accounting software that is compliant with MTD.

Xero

The tools you need for Making Tax Digital compliance are provided by Xero, from importing transactions to filing MTD returns. Extra features include online invoicing and digital payments.

Get started with Xero

Sage

Sage offers AI-powered, cloud-based accounting software that allows you to manage Making Tax Digital compliance with ease. Get software for free with no long-term commitment.

Get started with Sage Accounting

Tide

Admin Extra bundles Tide’s accounting solution with its Invoice Assistant product, an add-on that allows you to send unlimited invoices. You can get Admin Extra for two months free when you open a Tide business account, which is available as a free or paid plan.

Get started with Tide

Liam Redmond

As an editor at Forbes Canada, I specialize in exploring business innovations and entrepreneurial success stories. My passion lies in delivering impactful content that resonates with readers and sparks meaningful conversations.