Spotlight on: Making Tax Digital for Income Tax

What sole traders and landlords must do before April 2026

Making Tax Digital for income tax (MTD IT) stops being a future problem and becomes a real one from 6 April 2026 for many sole traders and landlords. It will change how you keep records, how often you report to HMRC, and how you plan for tax through the year.

The timetable and income thresholds are now confirmed. The Autumn Budget 2025 didn’t delay the start date, but it did soften parts of the penalty regime to make the transition more manageable.

This post sets out who must join in April 2026, what MTD IT actually involves in practice, and the steps worth taking now so you’re not trying to adapt at the last minute.

MTD IT in a nutshell

MTD IT changes how sole traders and landlords report income to HMRC.

Instead of keeping paper records and filing one Self Assessment return a year, you will:

• keep digital records of income and expenses
• send quarterly summary updates to HMRC using compatible software
• make end-of-year adjustments and submit a final declaration through that same software

HMRC decides when you must join MTD based on your qualifying income, which is your total gross income from self-employment and property before expenses or tax.

Official figures show that in 2023/24 around 7 million people in Self Assessment had self-employment or landlord income. About 2.9 million of those had qualifying income above £20,000 and are expected to join MTD IT between 2026 and 2028.

MTD does not mean five full tax returns a year. Quarterly updates are simple summaries pulled from your records. You still finalise your tax position once a year.

Who must join — and when

MTD IT applies to individuals filing Self Assessment who have qualifying income from self-employment and/or property above the relevant thresholds.

The confirmed rules are:

From 6 April 2026

You must use MTD-compatible software if your qualifying income exceeded £50,000 in the 2024/25 tax year.

From 6 April 2027

The requirement extends to those with qualifying income above £30,000 in the 2025/26 tax year.

From 6 April 2028

It is planned to extend to those with qualifying income above £20,000 in the 2026/27 tax year.

HMRC will look at your most recent Self Assessment return, total your self-employment turnover and rental income, and use that to decide your start date. Employment income, pensions and savings interest do not count towards these thresholds.

Based on 2023/24 data:

• about 864,000 people are expected to join from April 2026
• around 1,077,000 from April 2027
• around 975,000 from April 2028

If your qualifying income later drops below £30,000, current guidance suggests you remain within MTD unless HMRC confirms otherwise. It’s best to treat this as a long-term change.

What changes for sole traders

If you’re a sole trader above the threshold, MTD changes how you work during the year.

You will need to:

• keep digital records of all income and expenses
• send four quarterly updates per tax year for each sole-trader business
• make accounting and tax adjustments in an end-of-period statement
• submit a final declaration by 31 January, as now

You will still:

• register for Self Assessment as normal
• pay income tax and Class 2/4 NICs under existing rules for 2025/26
• manage payments on account and balancing payments

If you run more than one sole-trader business, you must keep separate records and send separate quarterly updates for each one.

What changes for landlords

Landlords above the threshold will also need to move to digital records and quarterly reporting.

Key points:

• digital records are required for rental income and allowable expenses
• if you’re also a sole trader, rental and trading income are reported separately
• for jointly owned property, you can report either total figures or just your share in quarterly updates, but all expenses must be included in the year-end position
• property type doesn’t matter — MTD is driven by income level, not whether a property is furnished or unfurnished

Many smaller landlords still use spreadsheets or paper records. Estimates suggest nearly 70% of landlords with one or two properties do this. If you’re in scope from April 2026, now is the time to move onto suitable software.

Key dates to be aware of

If you’re in the April 2026 group, these are the main milestones:

• 31 January 2026 – file your 2024/25 Self Assessment as normal
• 6 April 2026 – MTD IT starts for the 2026/27 tax year
• 7 August 2026 – first quarterly update due (or calendar-quarter equivalent)
• 7 November 2026, 7 February 2027, 7 May 2027 – remaining quarterly updates
• 31 January 2027 – final Self Assessment for 2025/26 filed in the usual way

From 2027/28 onwards, the aim is for tax to be finalised directly from software by 31 January using quarterly updates plus year-end adjustments.

What the Autumn Budget 2025 changed

The Budget confirmed MTD IT will start in April 2026 as planned. No change to thresholds or dates, but some welcome easements:

Soft landing on penalties

No penalty points for late quarterly updates in the first 12 months (annual returns still count).

Extra time before late payment penalties

An additional 15 days before late payment penalties apply in year one.

Further deferrals and exemptions

Some groups remain in standard Self Assessment until at least April 2027, and deputyship cases remain permanently exempt.

These changes are designed to ease the transition — not remove the need to be ready.

Six practical steps to take now

If your qualifying income is above or close to £50,000, the rest of 2025/26 is your preparation window.

1. Check if you’re in scope

Add together:

• gross self-employment income
• gross rental income

That total decides your MTD start date.

2. Review your records

Move away from paper or basic spreadsheets and into MTD-compatible software that suits how you work.

3. Choose your quarterly structure

You can use tax-year quarters or calendar quarters — pick what fits your systems best.

4. Clean up existing data

Reconcile accounts, tidy categories and remove duplication before you start.

5. Plan for cashflow

Quarterly updates give earlier tax estimates — use them to set money aside and avoid surprises. The continued freeze on tax thresholds makes this even more important.

6. Consider early sign-up

Joining the pilot early can help you learn the process with fewer consequences, though software options are still evolving.

Get MTD-ready

MTD IT is no longer theoretical. The rules, dates and thresholds are set, and April 2026 is happening.

If you’re a sole trader or landlord with qualifying income above £50,000, now is the time to:

• confirm whether you’re in scope
• choose suitable software
• tidy records
• plan for quarterly reporting

Doing this calmly now will make the transition far less stressful.

If you’ve got questions about how MTD applies to you, or you want help getting set up properly, I'm only a call or email away.