Making Tax Digital for Income Tax 2026: What Sole Traders and Landlords Need to Know
- 4 days ago
- 9 min read
Making Tax Digital for Income Tax is now here.
From 6 April 2026, some sole traders and landlords are required to keep digital records and send quarterly updates to HMRC using compatible software.
If you've heard about Making Tax Digital but aren't sure whether it applies to you, what the £50,000 threshold actually means or what you're now expected to do every three months, this guide explains everything in plain English.
What is Making Tax Digital for Income Tax?
Making Tax Digital for Income Tax, often shortened to MTD for Income Tax or MTD ITSA, changes the way certain sole traders and landlords keep their financial records and report information to HMRC.
If MTD applies to you, you'll generally need to:
keep digital records of your self-employment or property income and expenses;
use software that is compatible with Making Tax Digital;
send quarterly updates to HMRC; and
submit your tax return using compatible software.
One of the biggest misunderstandings about MTD is that quarterly updates mean completing four tax returns every year.
They don't.
The quarterly updates are summaries of the income and expenses contained within your digital records. They are not four separate tax returns.
You'll still have an end-of-year tax return to complete.
Who needs to use Making Tax Digital from April 2026?
The first stage of Making Tax Digital for Income Tax started on 6 April 2026.
You generally need to use MTD for Income Tax from April 2026 if:
you're registered for Self Assessment;
you receive income from self-employment and/or property; and
your total qualifying gross income from those sources was more than £50,000 on your 2024/25 Self Assessment tax return.
The important word here is gross.
The £50,000 threshold isn't based on your profit after expenses.
It's based on your qualifying gross income from self-employment and property before expenses are deducted.
Example
Imagine you're a sole trader and your figures are:
Turnover: £62,000
Allowable business expenses: £25,000
Profit: £37,000
You might look at the £37,000 profit and assume you're below the £50,000 MTD threshold.
However, the threshold is based on qualifying gross income before expenses, rather than simply your profit.
In this example, your £62,000 turnover could therefore bring you within the MTD rules.
What if I have both self-employed and rental income?
This is particularly important for people with more than one source of income.
Your qualifying gross income from self-employment and property is considered together when determining whether you exceed the MTD threshold.
For example:
Self-employed income: £35,000
Gross property income: £20,000
Total qualifying income: £55,000
Neither source individually exceeds £50,000.
But together they total £55,000.
That could mean you need to use Making Tax Digital for Income Tax.
This is why it's important to look at your overall position rather than checking each income source separately.
Is the Making Tax Digital threshold going down?
Yes.
Making Tax Digital for Income Tax is being introduced gradually.
The current timetable is:
From 6 April 2026 Qualifying income of more than £50,000
From 6 April 2027 Qualifying income of more than £30,000
From 6 April 2028 Qualifying income of more than £20,000
This means that even if you don't currently need to use MTD, you could be brought into the system over the next couple of years.
For example, a sole trader with qualifying income of £38,000 wouldn't normally have been required to start in April 2026 purely because of that income level, but could be required to start from April 2027 depending on their qualifying income for the relevant tax year.
What records do I need to keep digitally?
If Making Tax Digital applies to you, you'll need to create and maintain digital records of the relevant income and expenses for your self-employment or property business.
Depending on your circumstances, your records could include things such as:
sales and business income;
rental income;
business purchases;
travel expenses;
professional fees; and
other relevant business or property expenses.
Your digital records are then used by your compatible software to produce the information required for your quarterly updates.
This doesn't mean you can throw away all of your invoices, receipts or supporting documents.
You should continue retaining the records and evidence you're required to keep.
The major change is that the relevant financial information itself needs to be maintained digitally.
Do I need accounting software for Making Tax Digital?
You'll need software that is compatible with Making Tax Digital for Income Tax.
The software needs to be able to maintain the necessary digital records and communicate the required information to HMRC.
If you're already using accounting software, don't automatically assume you're ready for MTD.
It's worth checking whether your current software and setup meet the MTD for Income Tax requirements.
And if the thought of setting up accounting software and dealing with HMRC submissions doesn't appeal to you, you don't have to manage everything yourself.
At Treggena, we can help make sure the correct systems are in place and manage the accounting and submission side of Making Tax Digital with you.
What are Making Tax Digital quarterly updates?
Approximately every three months, your compatible software uses your digital records to calculate totals for your self-employment and property income and expenses.
These are then sent to HMRC as quarterly updates.
The important thing to remember is:
A quarterly update is a summary, not a tax return.
You don't normally need to make all of the accounting and tax adjustments that would be made when completing your final tax return before sending each quarterly update.
The idea is that HMRC receives information from your digital records throughout the year rather than everything being dealt with only at year end.
When are the MTD quarterly deadlines?
For people using the standard tax-year update periods, the quarterly deadlines are:
First quarterly covering up to 5 July Deadline: 7 August
Second quarterly covering up to 5 October Deadline: 7 November
Third quarterly covering up to 5 January Deadline: 7 February
Fourth quarterly covering up to 5 April Deadline: 7 May
The updates work cumulatively, meaning each one covers your digital records from the beginning of the tax year up to the end of that update period.
Some businesses with an accounting period ending on 31 March can use calendar update periods instead.
If Treggena is managing your MTD requirements, we'll make sure the appropriate periods and deadlines are followed.
What happens if I miss an MTD quarterly deadline in 2026/27?
There is an important rule for the first year of Making Tax Digital.
HMRC has confirmed that penalty points will not be applied for late quarterly updates during the 2026/27 tax year.
However, that doesn't mean you can simply ignore the quarterly updates.
You'll still need to send any required quarterly updates before you can submit your tax return.
Penalties can also still apply for a late tax return or late payment.
From the 2027/28 tax year onwards, the points-based late submission penalty system applies to missed quarterly update deadlines for people required to use MTD.
Under that system, missing a quarterly deadline can result in a penalty point. Once you reach the relevant threshold of four points, a £200 penalty can be charged, with further £200 penalties possible for subsequent missed submission deadlines while you're at the threshold.
So although there's some additional flexibility during the first year, it's still important to get into the habit of keeping your records up to date and meeting the quarterly deadlines.
Does Making Tax Digital mean I have to complete four tax returns every year?
No.
This is worth repeating because it's one of the easiest parts of MTD to misunderstand.
Four quarterly updates does not mean four tax returns.
The quarterly updates provide HMRC with summaries based on the digital records you've kept throughout the year.
You'll still need to deal with your final tax position through your end-of-year tax return.
Do I still need to complete a Self Assessment tax return?
Yes.
Making Tax Digital hasn't removed the annual tax return.
There's also an important transition for people who started MTD in April 2026.
Your 2025/26 Self Assessment tax return is still completed in the usual way and is due by 31 January 2027.
Your first year operating under mandatory MTD is 2026/27.
For that tax year, you'll keep the required digital records and send your quarterly updates throughout the year.
Your tax return for 2026/27 is then due by 31 January 2028 and is submitted using your MTD-compatible software.
Can my accountant handle Making Tax Digital for me?
Yes.
Just because Making Tax Digital applies to you doesn't mean you need to become an expert in MTD yourself.
Your accountant can help manage the process.
At Treggena, we can help with areas such as:
checking whether MTD applies to you;
reviewing your qualifying income;
helping get your digital records set up correctly;
making sure appropriate compatible software is being used;
maintaining your accounting records;
preparing and submitting your quarterly updates;
preparing your year-end figures; and
completing the relevant tax return requirements.
The aim is to make Making Tax Digital as straightforward as possible.
You concentrate on running your business or managing your properties. We'll help take care of the accounting and reporting side.
What if I currently keep paper records?
If you've always kept your records using receipts, invoices and paperwork, MTD may sound like quite a big change.
But it doesn't need to be complicated.
The important thing is getting an appropriate digital system in place and developing a straightforward process for keeping your records updated.
Treggena can help you understand what information we need from you, get the appropriate system in place and manage the ongoing MTD requirements.
Once everything is properly set up, maintaining your records throughout the year can become much more manageable.
Can I use spreadsheets for Making Tax Digital?
Potentially.
Using a spreadsheet doesn't automatically mean you're compliant with MTD, but spreadsheets can form part of an MTD-compatible setup.
Depending on how your records are maintained, compatible bridging software may be needed so that the necessary information can be submitted to HMRC while maintaining the required digital links.
If you're currently using spreadsheets and aren't sure whether your setup is suitable, Treggena can review how you're keeping your records and explain what needs to change.
What happens if my income is below £50,000?
You may not have been required to start MTD in April 2026 based solely on that income level, but you shouldn't assume Making Tax Digital won't affect you.
The qualifying-income threshold is reducing.
If your qualifying income is:
More than £30,000 — you may need to start from 6 April 2027.
More than £20,000 — you may need to start from 6 April 2028.
Whether and when you need to join depends on your qualifying income for the relevant earlier tax year.
It's therefore worth reviewing your position each year.
I'm a landlord. Does Making Tax Digital apply to rental income?
It can.
Property income is included when calculating qualifying income for Making Tax Digital for Income Tax.
This means landlords with sufficient qualifying gross property income may need to keep digital records and send quarterly updates.
And remember, if you're both a landlord and self-employed, the qualifying gross income from those activities can be considered together.
For example:
Property income: £28,000
Self-employed income: £27,000
Combined qualifying income: £55,000
That could bring you within MTD even though neither source individually exceeds £50,000.
I'm a sole trader. Does Making Tax Digital apply to me?
Potentially.
If you're a sole trader and your qualifying income was more than £50,000 on your 2024/25 Self Assessment tax return, you should check whether you were required to start using Making Tax Digital from 6 April 2026.
If you're below that threshold, remember that the threshold reduces to more than £30,000 from April 2027 and more than £20,000 from April 2028, based on qualifying income for the relevant earlier tax year.
Does Making Tax Digital for Income Tax apply to limited companies?
The April 2026 changes explained in this guide relate specifically to Making Tax Digital for Income Tax.
They primarily affect individuals with qualifying self-employment and/or property income.
A limited company is a separate legal entity and pays Corporation Tax on its profits, so the April 2026 MTD for Income Tax rules don't apply to the company's Corporation Tax in the same way.
However, if you're a limited company director who also personally receives qualifying self-employment or property income, your personal circumstances may still need to be considered.
What should I do if I think Making Tax Digital applies to me?
If you're unsure where you stand, start by establishing:
How much qualifying self-employment and property income you have.
Whether that income exceeds the relevant threshold.
When Making Tax Digital applies to you.
Whether your current bookkeeping system is suitable.
Whether you're using compatible software.
Who will maintain your digital records.
Who will deal with your quarterly updates and annual tax return.
Once those points are clear, Making Tax Digital becomes much easier to manage.
Let Treggena Handle Making Tax Digital With You
If you're a sole trader or landlord and you're unsure what Making Tax Digital means for you, Treggena can help.
We'll check your circumstances, help establish whether MTD applies to you, review your existing bookkeeping setup and help get the correct digital systems in place.
Where we're managing your ongoing accounting, we can also help maintain your records, prepare the required quarterly updates and deal with your year-end tax return.
You don't need to spend your time trying to become an expert in Making Tax Digital.
That's what we're here for.
If you'd like to check whether Making Tax Digital applies to you or discuss getting your accounts ready, speak to the Treggena team.
Call us on 0191 341 0142 or use the contact form on our website.
This guide provides general information based on the rules in force at the time of publication. Tax rules can change and your individual position will depend on your circumstances.
Comments