Making Tax Digital for Income Tax: a practical guide for sole traders and landlords

What is changing

Making Tax Digital (MTD) for Income Tax changes how sole traders and landlords report their business and property income to HMRC. Instead of a single tax return after the year end, you keep digital records through the year, send a short summary of income and expenses to HMRC every quarter from compatible software, and then submit your tax return, including any other income, by 31 January after the tax year ends.

The quarterly updates do not change how much tax you pay or when you pay it. They are summaries, not tax returns, and figures can be adjusted in later updates or in the final return.

Who it applies to, and when

MTD for Income Tax applies to people registered for Self Assessment who receive income from self-employment or property, based on their qualifying income in an earlier tax year:

• From 6 April 2026, qualifying income over £50,000 on the 2024–25 tax return.
• From 6 April 2027, qualifying income over £30,000 on the 2025–26 tax return.
• From 6 April 2028, qualifying income over £20,000 on the 2026–27 tax return.

Qualifying income is your combined self-employment and property turnover, income before expenses, not your profit. Your share of jointly owned property income counts. Employment income, your share of partnership profits, dividends and pensions do not.

Quarterly update deadlines

Updates are sent every three months and cover the tax year to date, ending on 5 July, 5 October, 5 January and 5 April. They are due by 7 August, 7 November, 7 February and 7 May. You can choose calendar quarters instead (ending 30 June, 30 September, 31 December and 31 March), with the same submission dates.

Exemptions

Some people are automatically exempt, including anyone with qualifying income of £20,000 or less, people without a National Insurance number, and, for now, partnerships. Others can apply for an exemption if they are digitally excluded because of age, disability, religion, location or lack of internet access. A small number of situations are temporarily exempt until April 2027. HMRC’s exemption guidance sets out the full list.

Penalties in the first year

Late submissions build up penalty points, with a £200 penalty once you reach the threshold. For the 2026–27 tax year, HMRC will not give penalty points for late quarterly updates, although points still apply to a late tax return. Late-payment penalties are also lighter in 2026–27 than they will be from 2027–28. It is still sensible to treat the first year as a full rehearsal.

How to prepare

1. Work out your qualifying income from the relevant year’s return to find your start date.
2. Choose software that is compatible with MTD for Income Tax and suits how you work. Bridging software can connect spreadsheets if you prefer them.
3. Tidy up your record keeping so income and expenses are recorded as they happen rather than at the year end.
4. Decide who does what. An accountant can be authorised to send updates for you, or to review your figures before you send them.

Anewthing can check whether and when MTD applies to you, help you choose and set up software, and take on the quarterly updates as part of bookkeeping or tax return support.