Making Tax Digital is live – what sole traders and landlords need to know

Posted: August 20, 2026

Making Tax Digital for Income Tax (MTD) finally became mandatory for the first group of taxpayers from 6 April 2026. For those affected, the first quarterly reporting deadline has now passed, on 7 August 2026.

MTD represents a significant change to the way many sole traders and landlords report their income to HMRC. Instead of maintaining records during the year and dealing with HMRC primarily through an annual Self Assessment tax return, those within MTD must maintain digital accounting records and submit information to HMRC every quarter.

Although the first wave only affects individuals with higher levels of self-employment and property income, the thresholds will fall considerably over the next two years. Many more taxpayers therefore need to start preparing for MTD now.

Who is already within MTD?

From 6 April 2026, MTD for Income Tax applies to sole traders and landlords whose total qualifying income for the 2024/25 tax year was more than £50,000.

Importantly, the £50,000 test looks at gross qualifying income before expenses, rather than taxable profit.

Qualifying income broadly includes gross income from:

self-employment; and
UK and overseas property businesses.

Where an individual has more than one relevant source of income, the amounts are combined when determining whether the threshold has been exceeded.

For example, someone receiving £35,000 of gross self-employment income and £20,000 of gross rental income would have qualifying income of £55,000 and would therefore have entered MTD from April 2026.

Income such as employment earnings, pensions, dividends and savings interest does not count towards the MTD qualifying income threshold.

The threshold is falling

Even if you are not currently required to use MTD, you may be brought within the regime soon.

The thresholds are being reduced as follows:

Qualifying income	MTD starts
More than £50,000 in 2024/25	6 April 2026
More than £30,000 in 2025/26	6 April 2027
More than £20,000 in 2026/27	6 April 2028

This means that landlords and smaller sole traders who are currently outside MTD should not assume that the changes do not affect them.

In particular, anyone whose gross self-employment and property income exceeded £30,000 in the tax year ended 5 April 2026 should be preparing for MTD to apply from 6 April 2027.

What does MTD actually require?

There are three main elements.

First, taxpayers must maintain digital records of their business or property income and expenses using MTD-compatible software.
Second, information from those records must be submitted to HMRC through quarterly updates.
Finally, the annual tax position must still be finalised after the end of the tax year.

MTD therefore does not mean that the annual tax return has disappeared.

The Self Assessment deadline remains 31 January following the end of the tax year, and this is also still the date by which the balancing tax payment will generally need to be made.

What is a quarterly update?

One of the common misconceptions about MTD is that taxpayers now have to prepare four complete tax returns every year.

That is not the case.

The quarterly updates are essentially summaries generated from the digital accounting records. They provide HMRC with totals for relevant categories of income and expenditure.

For the 2026/27 tax year, the standard quarterly deadlines are:

7 August 2026
7 November 2026
7 February 2027
7 May 2027

The first of these deadlines has therefore just passed.

The quarterly figures do not need to represent a fully adjusted set of accounts or a final tax computation. Year-end tax adjustments can still be made when the annual tax return is prepared.

Nevertheless, the underlying records need to be maintained properly throughout the year. MTD is therefore as much a change to record keeping as it is a change to tax reporting.

What if you missed the first 7 August deadline?

HMRC has introduced some breathing space for taxpayers during the first year.

There are no penalties for missing a quarterly update deadline for the 2026/27 tax year.

This does not mean that the quarterly reporting requirement can simply be ignored. The outstanding information will still need to be submitted, and taxpayers must maintain the required digital records.

From later years, the new points-based late submission penalty regime will apply to late quarterly updates. Under this system, a taxpayer can receive a penalty point for each missed deadline. Once the relevant points threshold is reached, a £200 financial penalty can arise, with further £200 penalties potentially applying to subsequent missed deadlines.

It therefore makes sense to establish good reporting procedures during this first year, while HMRC is providing greater flexibility.

Do I need accounting software?

Those within MTD need to use software that is compatible with HMRC’s MTD system.

This does not necessarily mean abandoning spreadsheets. In some circumstances spreadsheets can continue to be used, provided suitable bridging software is used to connect the records to HMRC and the digital record-keeping requirements are satisfied.

For many businesses and landlords, however, moving to cloud accounting software may be the more practical long-term solution.

One of the potential benefits is that records are kept more regularly rather than being reconstructed months after the end of the tax year. This can also provide business owners and landlords with more useful and up-to-date financial information.

Landlords need to take particular care

MTD is not just a regime for businesses.

Individual landlords can be caught even where property letting is not regarded as their main occupation.

Someone with a relatively modest property portfolio may easily exceed the thresholds because it is gross rental income rather than rental profit which is relevant.

For example, a landlord receiving £36,000 of rent but incurring £15,000 of mortgage interest and other property expenses still has £36,000 of qualifying income for MTD purposes.

This will become particularly important when the threshold falls to £30,000 from April 2027 and then £20,000 from April 2028.

What should you do now?

If you were required to enter MTD from April 2026 and have not yet dealt with your first quarterly update, you should address this as soon as possible rather than waiting for the next deadline.

If your qualifying income exceeded £30,000 in 2025/26, you should now start preparing for MTD from April 2027. This gives you time to choose appropriate software and establish digital record-keeping procedures before the new tax year begins.

Even taxpayers with qualifying income between £20,000 and £30,000 should begin thinking about the changes, as they are currently due to enter the regime from April 2028.

The move to MTD has been discussed for many years, but it is no longer a future proposal. For the first group of taxpayers, MTD is now part of the annual tax compliance cycle.

How RJP can help

RJP can advise you whether and when MTD applies to you, help you select and set up suitable accounting software, and assist with your quarterly submissions and annual tax return.

If you are a sole trader or landlord and are unsure whether your income brings you within MTD – either now or from April 2027 – please contact us to discuss the steps you need to take.