Making Tax Digital for Sole Traders & Landlords

Making Tax Digital (MTD) for Income Tax is a new system introduced by HM Revenue & Customs that will change how sole traders and landlords report their income. The aim is to modernise the UK tax system by requiring digital record keeping and more frequent reporting of income and expenses.

Who Will Be Affected

Making Tax Digital for Income Tax will apply to individuals with income from self-employment or property above certain thresholds.

• From April 2026 – individuals with qualifying income over £50,000
• From April 2027 – individuals with qualifying income over £30,000
• From April 2028 – individuals with qualifying income over £20,000

The threshold is based on total income from self-employment and property combined, before expenses are deducted.

What Will Change

Under the new system, individuals will no longer rely solely on a single annual Self-Assessment tax return. Instead, they will be required to:

• Maintain digital records of income and expenses
• Submit quarterly updates to HMRC during the tax year
• Complete an end-of-year final declaration confirming total taxable income
• Ensure their records meet HMRC’s digital reporting requirements

Quarterly Reporting

Under Making Tax Digital for Income Tax, individuals will be required to submit quarterly updates to HM Revenue & Customs throughout the tax year.

The standard quarterly periods follow the UK tax year:

• Quarter 1: 6 April – 30 June
• Quarter 2: 1 July – 30 September
• Quarter 3: 1 October – 31 December
• Quarter 4: 1 January – 5 April

Each quarterly update must normally be submitted within one month after the end of the quarter.

Alternative Quarterly Periods

In some cases, individuals may be able to use calendar quarters instead of the standard tax-year quarters. These periods are:

• 1 January – 31 March
• 1 April – 30 June
• 1 July – 30 September
• 1 October – 31 December

This option may suit businesses that already keep records based on calendar months or quarters.

Who Does Not Need to Follow Making Tax Digital

Not everyone will be required to comply with Making Tax Digital for Income Tax introduced by HM Revenue & Customs.

You may not need to follow the MTD rules if:

• Your total income from self-employment and property is below £20,000
• You only receive income through employment (PAYE)
• Your income comes solely from pensions or savings
• You already report income through other tax systems such as PAYE
• You do not currently need to complete a Self-Assessment tax return

Some individuals may also qualify for an exemption if they are unable to use digital systems due to circumstances such as age, disability, or lack of internet access.

Why Preparation Is Important

Preparing for Making Tax Digital early helps ensure that record-keeping processes are in place before the rules become mandatory. This can reduce the risk of errors, missed deadlines, and potential penalties.

How We Can Help

We assist clients with:

• Preparing for Making Tax Digital compliance
• Ensuring record keeping meets HMRC requirements
• Managing quarterly reporting obligations
• Completing the final year-end declaration
• Providing ongoing tax support and guidance

If you would like to understand how Making Tax Digital may affect you as a sole trader or landlord, please contact us for further information.