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How tax years work

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Summary

An explanation of how tax years work for Making Tax Digital (MTD) for Income Tax.

Description

The UK tax year

The UK tax year runs from 6 April to 5 April the following year. Each tax year takes its name from the two calendar years it covers, for example, 2026/27. MTD for Income Tax reports on this period.

You report your sole trader and property income for each tax year separately. Your figures don't roll into the next year.

When you start using MTD for Income Tax

HMRC is rolling out MTD for Income Tax in three phases. The phase you fall into depends on your qualifying income. Qualifying income is your combined gross income from self-employment and property before expenses:

  • 6 April 2026: qualifying income over £50,000 in the 2024/25 tax year
  • 6 April 2027: qualifying income over £30,000 in the 2025/26 tax year
  • 6 April 2028: qualifying income over £20,000 in the 2026/27 tax year

Once you join MTD for Income Tax, you stay in it. This is true even if your income drops below the threshold in later years.

How MTD for Income Tax divides the tax year

MTD for Income Tax splits each tax year into four quarters. You send HMRC an update for each quarter through Sage Sole Trader. These updates show your running total of income and expenses for the tax year so far.

The quarter periods line up with the tax year:

  • 6 April to 5 July
  • 6 July to 5 October
  • 6 October to 5 January
  • 6 January to 5 April

Quarterly update deadlines

Each quarterly update is due on the 7th of the second month after the quarter ends:

  • Quarter one: 7 August
  • Quarter two: 7 November
  • Quarter three: 7 February
  • Quarter four: 7 May

The end of year tax return

After the fourth quarter, you submit an end of year tax return. This confirms your full-year figures. It replaces the Self Assessment tax return for your sole trader and property income.

The end of year tax return is due by 31 January after the end of the tax year. This is the same date as the Self Assessment tax return deadline. You also pay any tax due by this date.

EXAMPLE:

The 2026/27 tax year

For the 2026/27 tax year:

  • The tax year runs from 6 April 2026 to 5 April 2027
  • Quarter one update due 7 August 2026
  • Quarter two update due 7 November 2026
  • Quarter three update due 7 February 2027
  • Quarter four update due 7 May 2027
  • End of year tax return due 31 January 2028

More information

For more information about MTD for Income Tax, go to makingtaxdigital.campaign.gov.uk/how-making-tax-digital-works.