Making Tax Digital for Income Tax: What Changes for Sole Traders and Landlords
Making Tax Digital for Income Tax is the largest change to how self-employed people and landlords report to HMRC in a generation. The annual return does not disappear, but it stops being the only thing you file. If your income is above the threshold, you now send updates four times a year.
Who is in, and from when
| From | Qualifying income above |
|---|---|
| April 2026 | £50,000 |
| April 2027 | £30,000 |
| April 2028 | £20,000 |
HMRC decides using the figures on your most recently filed return. That is worth sitting with for a moment: the return you submit this January determines whether you are mandated next time. HMRC writes to people it believes are caught, but the obligation is yours whether the letter arrives or not.
What "qualifying income" actually means
It is gross income from self-employment and property — turnover, before you take a single expense off. A driver with £55,000 of fares and £20,000 of costs has £35,000 of profit but £55,000 of qualifying income, and is in.
Sources are added together. A trade turning over £28,000 alongside a rental property bringing in £24,000 totals £52,000, so both are inside MTD even though neither reaches the threshold alone.
Not counted: employment income, pension income, dividends and savings interest.
What you actually have to do
1. Keep digital records
Income and expenses recorded digitally, as they happen, in software that talks to HMRC. Not a carrier bag of receipts totalled up in January. This is the part that takes the effort, and the part worth starting before your date rather than after.
2. Send quarterly updates
Four times a year, a summary of income and expenses goes to HMRC. Deadlines are one month and seven days after each quarter ends:
| Quarter | Due |
|---|---|
| 6 April – 5 July | 7 August |
| 6 July – 5 October | 7 November |
| 6 October – 5 January | 7 February |
| 6 January – 5 April | 7 May |
These are cumulative — each one restates the year to date, so a mistake in quarter one is corrected in quarter two rather than needing an amendment.
3. Make a final declaration
After the tax year ends, one final submission pulls everything together, adds any other income, claims reliefs and allowances, and produces the actual tax figure. It replaces the Self Assessment return you file today, and the deadline is the same 31 January.
What it does not change
- When you pay. Payment dates are unchanged — 31 January and, where they apply, payments on account on 31 July.
- What is taxable. No new rules on allowable expenses. The reporting changes, not the tax.
- Employment income. If you are also employed, PAYE carries on as it is.
Penalties work differently now
Late submissions move to a points system. Each missed deadline earns a point, and once you reach the threshold for your filing frequency a £200 penalty applies, with a further £200 for each subsequent failure. Points expire after a period of compliance. Late payment penalties are charged separately and increase the longer the tax is outstanding.
What to do before your start date
- Work out your qualifying income from your last return — gross, all sources added together.
- Separate your bank accounts. A dedicated business account makes digital records almost automatic. Mixing personal spending in is what makes bookkeeping expensive.
- Choose compatible software and start using it a quarter or two early, while mistakes still cost nothing.
- Photograph receipts as you go. Every serious package will capture them from a phone.
The firms that will find this painful are the ones that treat bookkeeping as an annual event. Once records are current, a quarterly update is a few minutes' work.
Getting help with this
AJH Accountants handles bookkeeping and Making Tax Digital for clients across the UK. We file the return, tell you what you can claim, and deal with HMRC on your behalf, so nothing depends on you remembering a deadline.
See how our bookkeeping and Making Tax Digital service works, or send us a quotation request and we will call you back. You can also call the office on 01204 840303.
Quick answers
- MTD for Income Tax applies to self-employment and property income, not to employment or dividends.
- Qualifying income is turnover before expenses, and income from several sources is added together.
- Once you are in, four quarterly updates plus a final declaration replace the single annual return.
- Records must be kept digitally and sent through compatible software — a spreadsheet alone is not enough without bridging software.
- Your first quarterly update is due one month and seven days after the quarter ends.
- Getting bookkeeping in order before your start date is the whole job. The filing is the easy part.
FAQs
Who has to use Making Tax Digital for Income Tax, and when?
It is being phased in by income level. Sole traders and landlords with qualifying income above £50,000 joined from April 2026. Those above £30,000 follow from April 2027, and above £20,000 from April 2028. HMRC uses the figures from your last submitted return to decide, so the return you file now determines whether you are caught next time.
What counts as qualifying income?
Gross income from self-employment and property, before expenses. Employment income, pensions, dividends and savings interest are not counted. If you have more than one business, or a business and a rental property, they are added together — two £30,000 sources put you over £50,000 even though neither reaches it alone.
When are the quarterly updates due?
Each update covers a standard quarter and is due one month and seven days after it ends: 7 August, 7 November, 7 February and 7 May. They are running totals rather than four separate filings, and they do not have to be perfect — the final declaration after the year end is where adjustments, reliefs and the actual tax figure land.
Do landlords have to use Making Tax Digital?
Yes, if property income takes you over the threshold. Rental income counts as qualifying income in exactly the same way as self-employment. Jointly owned property counts on your share. Furnished holiday lets and overseas property are included in the total too.
Can I keep using a spreadsheet?
Only with bridging software that submits from it to HMRC. The requirement is that records are created and kept digitally and that data flows to HMRC without being retyped. A spreadsheet you type up from a shoebox of receipts once a year does not meet the test.
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Where this information comes from
This article was written using the following published sources, and was last reviewed on 3 September 2026:
Please read this before acting on anything above
We have taken care to get this right and believe it to be correct to the best of our knowledge at the time of writing. Even so, we cannot guarantee that everything here is completely accurate or still current, and we do not accept responsibility for any loss arising from relying on it. Tax rules change, sometimes at short notice, and pages are not always updated the same day.
This is general information, not advice about your own circumstances. Two people with the same income can owe very different amounts. Please do not make a decision on the strength of this article alone. Check the sources above, do your own research, and reach your own decision — and where money or a filing deadline turns on it, speak to a qualified accountant who knows your full position first.