MTD for Income Tax: What SaaS Founders Need to Know Before April 2026

Making Tax Digital (MTD) for Income Tax is the next major phase in HMRC’s push to modernise the UK tax system — and it’s much closer than many founders realise.

From April 2026, certain self-employed individuals and landlords will be legally required to keep digital records and submit quarterly updates to HMRC using compatible software. While this doesn’t apply directly to most limited companies, many SaaS founders will still be affected personally, particularly where they have self-employment income, property income, or side ventures alongside their company.

Understanding how MTD for Income Tax works now — rather than scrambling later — will save time, stress, and compliance headaches.

What is MTD for Income Tax?

MTD for Income Tax builds on the existing MTD for VAT rules. The aim is simple: reduce errors and move tax reporting away from annual, manual submissions towards ongoing digital reporting throughout the year.

Under MTD for Income Tax, affected individuals will be required to:

• keep digital records of income and expenses
• submit quarterly updates to HMRC using approved software
• submit a final declaration after the end of the tax year

This final declaration replaces the traditional Self Assessment tax return.

The key shift is frequency. Instead of one annual return, HMRC will receive updates throughout the year — changing how tax compliance fits into day-to-day financial management.

When does MTD for Income Tax start?

MTD for Income Tax is being introduced in stages, based on gross income (before expenses) from self-employment and property.

The current timetable is:

From April 2026
Applies to individuals with qualifying income over £50,000

From April 2027
Applies to individuals with qualifying income over £30,000

From April 2028
Applies to individuals with qualifying income over £20,000

Qualifying income includes turnover from self-employment and property combined. Salary income does not count towards the threshold.

Who will be affected?

MTD for Income Tax applies to:

• sole traders
• landlords (UK and overseas property)
• individuals with multiple self-employment activities

If your combined gross income from these sources exceeds the relevant threshold, you will be required to comply.

For SaaS founders, this often applies where:

• you run a SaaS business through a company and have side income
• you earn consultancy income outside the company
• you own rental property personally
• you previously traded as a sole trader

Even if your SaaS business itself is incorporated, you personally may still fall into scope.

Are there exemptions?

Yes — some groups are excluded from MTD for Income Tax.

• trusts and estates
• trustees of registered pension schemes
• non-resident companies
• certain complex partnerships

There are also exemptions for individuals who are digitally excluded due to age, disability, religion, or other recognised reasons. Foster carers and some foreign businesses are also excluded.

Exemptions are specific and must usually be applied for — they are not automatic.

What does MTD for Income Tax actually require?

There are three core obligations.

1. Digital record-keeping

You must keep digital records of income and expenses using MTD-compatible software. This does not mean spreadsheets are banned — but if you use them, they must be digitally linked to bridging software that submits data to HMRC without manual copying.

2. Quarterly updates

You must submit four quarterly updates each year covering:

• self-employment income and expenses
• property income and expenses

These updates are similar in scope to current SA103 and SA105 forms.

Importantly: no tax calculations or adjustments are required at this stage. HMRC receives raw income and expense figures only.

Quarterly deadlines (from full implementation) will be:

• 7 August
• 7 November
• 7 February
• 7 May

3. Final declaration

After the end of the tax year, you submit a final declaration confirming all income, reliefs, and adjustments. This replaces the traditional Self Assessment return and must still be filed by 31 January.

What is the MTD pilot — and should you care?

HMRC is running a voluntary MTD for Income Tax pilot ahead of April 2026.

The pilot allows eligible accountants and clients to:

• test MTD-compatible software
• practise quarterly submissions
• refine internal workflows
• identify issues early
• submit without penalties

For founders and advisers, the pilot offers a low-risk environment to get familiar with the system before it becomes mandatory.

During the pilot:

• quarterly deadlines are slightly earlier
• no penalties apply for missed quarterly submissions
• final declarations are still required

Early adoption is particularly valuable for businesses with multiple income streams or more complex reporting.

What SaaS founders should do now

Even if MTD for Income Tax doesn’t apply to you immediately, preparation matters.

• review all personal income sources, not just your SaaS company
• identify whether you will cross future thresholds
• ensure your accounting software is MTD-compatible
• stop relying on manual year-end clean-ups
• consider joining the pilot if eligible

MTD rewards businesses that keep clean, up-to-date records — and exposes those that don’t.