Making Tax Digital for Income Tax: What Changes for Sole Traders and Landlords
MTD for Income Tax is live for the highest earners and reaches everyone else soon. Here is who is in, when quarterly updates are due, what qualifying income means, and what to do before your start date.
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.
Originally published at ajhaccountant.co.uk/blog/making-tax-digital-income-tax-sole-traders-landlords.