Making Tax Digital is no longer something to prepare for; it has started.
For many UK sole traders and landlords, the way they report income and expenses to HMRC has changed.
From 6 April 2026, Making Tax Digital (MTD) for Income Tax became mandatory for sole traders and landlords with qualifying income from self-employment and property exceeding £50,000.
And the changes do not stop there.
From 6 April 2027, the threshold reduces to more than £30,000, followed by a further reduction to more than £20,000 from 6 April 2028.
For business owners and landlords who have not yet reviewed their position, now is the right time to understand what the changes mean.
What is Making Tax Digital for Income Tax?
Making Tax Digital for Income Tax is HMRC’s digital reporting system for individuals with income from self-employment and/or property.
Instead of simply preparing one Self-Assessment tax return after the end of the tax year, affected taxpayers are required to:
- Keep digital records of their business income and expenses
- Use compatible accounting or tax software
- Send quarterly updates to HMRC
- Submit their year-end information
- Pay any tax due by the normal deadline
HMRC’s current guidance confirms that compatible software must be used to maintain digital records and submit the required information.
Who is affected?
The first stage applies to individuals with qualifying income exceeding £50,000.
Importantly, the threshold is based on gross income before expenses, rather than your taxable profit.
For example:
A sole trader has £60,000 of turnover and £20,000 of allowable business expenses.
Their qualifying income is £60,000, not £40,000.
Therefore, they fall within the first MTD threshold.
The MTD timetable
The rollout is being introduced in stages:
| Tax year | Qualifying income | MTD start date |
| 2024/25 | Over £50,000 | 6 April 2026 |
| 2025/26 | Over £30,000 | 6 April 2027 |
| 2026/27 | Over £20,000 | 6 April 2028 |
HMRC has confirmed this staged approach in its current guidance.
This means that even if you are not required to use MTD today, you may be affected in the near future.
What do sole traders need to do?
If you are affected by MTD for income tax, there are several practical steps you need to take.
Check whether you are required to join
The first step is to establish your qualifying income and determine when MTD applies to you.
Do not simply look at your profit. The relevant threshold is based on qualifying income from self-employment and property.
Use compatible software
You will need software capable of supporting MTD for Income Tax.
This is where many businesses need to change their current bookkeeping processes.
If your records are currently maintained through spreadsheets, paper records or software that is not compatible with MTD, you should review your system.
Keep digital records
Your income and expenses need to be maintained digitally in accordance with HMRC’s requirements.
Good bookkeeping therefore becomes even more important.
Submit quarterly updates
MTD introduces quarterly reporting to HMRC.
This means your tax position will be reported throughout the year rather than relying entirely on an annual submission.
Complete the year-end process
Quarterly updates do not simply replace the self-assessment tax return with four tax returns.
There is still a year-end process to finalise the figures and calculate the final tax position.
Why good accountants matter more than ever
One of the biggest changes MTD brings is the need to maintain accurate records throughout the year.
Under the traditional system, a business owner could potentially leave their bookkeeping until months after the year ended.
That approach becomes increasingly difficult under MTD.
Regular bookkeeping can provide much more than compliance.
It can help you understand:
- How profitable your business actually is
- How much tax you may need to budget for
- Whether expenses are being captured correctly
- Your cash flow position
- Whether your business is growing
- Whether you need to adjust pricing
- Whether you should consider changing your business structure
MTD should therefore be viewed as more than an HMRC reporting requirement. It can become a valuable management tool for your business.
What happens if you are not ready?
If you are already within the MTD regime, delaying preparation could create unnecessary administrative pressure.
The good news is that HMRC has stated that it will not apply penalty points for late quarterly updates during the first tax year for those required to use MTD from 6 April 2026.
However, penalties can still apply to late tax returns and late tax payments.
So while there is some transitional flexibility around quarterly updates, this should not be interpreted as a reason to ignore the new requirements.
What should landlords know?
MTD does not only affect sole traders.
Individuals receiving qualifying property income can also fall within the rules.
This is particularly important for landlords who may have the following:
- One or more rental properties
- Residential property income
- Commercial property income
- Jointly owned property
- Other sources of taxable property income
Landlords should review their records and determine whether their property income puts them within the relevant threshold.
HMRC’s digital record-keeping requirements specifically address certain groups including joint property owners and landlords.
What should you do now?
If you are a sole trader or landlord, we recommend taking five steps:
Establish your MTD start date
Work out your qualifying income and determine whether you are already required to comply.
Review your bookkeeping
Make sure your records are accurate, complete and maintained digitally.
Check your software
Ensure that your accounting software is compatible with MTD for Income Tax.
Get your quarterly process right
Don’t wait until a deadline approaches. Build the reporting process into your normal bookkeeping routine.
Speak to your accountant
MTD is not simply an administrative change. It can affect how you manage your accounts, tax planning and cash flow.
MTD is an opportunity, not just another compliance requirement
For many business owners, the initial reaction to MTD may be:
“HMRC is making things more complicated.”
But there is another way to look at it.
When your accounts are kept accurately and up to date throughout the year, you can make decisions based on current financial information, rather than discovering what happened six or twelve months later.
That can help you identify problems earlier, plan for tax, manage cash flow and make better business decisions.
At Analytix, we believe that accounting should not simply tell you what happened, it should help you decide what happens next.
How Analytix can help
Making Tax Digital can feel complicated, particularly if you are unsure whether you are affected, what software you need or how your bookkeeping process needs to change.
At Analytix Certified Accountancy & Advisory Limited, we help businesses and individuals with:
- Making Tax Digital
- Bookkeeping
- Self-Assessment
- Tax planning
- VAT
- Payroll
- Company accounts
- Corporation Tax
- Business advisory
- Management accounts
If you are a sole trader or landlord and want to understand when MTD applies to you and what you need to do, speak to our team.
Don’t wait until an HMRC deadline is approaching. Get your accounting systems ready now.
Analytix Certified Accountancy & Advisory Limited
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