Making Tax Digital for Income Tax 2026: what UK sole traders and landlords need to know
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From 6 April 2026, many sole traders and landlords must keep digital records and send HMRC quarterly income and expense updates through compatible software. This is Making Tax Digital (MTD) for Income Tax — different from MTD for VAT and separate from corporation tax.
HMRC estimates around 864,000 sole traders and landlords are in the first wave. If qualifying income from self-employment and/or property was more than £50,000 in 2024–25, you are in that group. The threshold falls in later years. This guide covers eligibility, deadlines, software, penalties, landlord quirks and practical steps. Facts reviewed 10 September 2026.
What is Making Tax Digital for Income Tax?
MTD is HMRC’s new way for sole traders and landlords to do Self Assessment. You must:
1. Keep digital records of income and expenses for each in-scope business.
2. Send quarterly updates through compatible software.
3. Submit a year-end tax return through that software and pay by January.
Quarterly updates are not tax returns and do not trigger a tax payment. The first mandated year-end return and payment is due 31 January 2028. HMRC does not provide software; use its official list or spreadsheets with bridging software.
GOV.UK: https://www.gov.uk/government/collections/making-tax-digital-for-income-tax
Who must join in 2026 (and who waits until 2027/2028)
You must use MTD if you are registered for Self Assessment, have self-employment and/or property income, and qualifying income exceeds the phased threshold. HMRC writes to people above the threshold, but you remain responsible even if no letter arrives.
Thresholds and start dates
2024–25: qualifying income more than £50,000; mandatory start 6 April 2026.
2025–26: qualifying income more than 30,000; mandatory start 6 April 2027.
2026–27: qualifying income more than £20,000; mandatory start 6 April 2028.
From September 2026 HMRC begins automatically signing up people required for 2026–27 based on more than £50,000 in 2024–25. Guidance: https://www.gov.uk/guidance/check-what-to-do-if-hmrc-has-signed-you-up-for-making-tax-digital-for-income-tax
Source: https://www.gov.uk/guidance/find-out-if-and-when-you-need-to-use-making-tax-digital-for-income-tax
Qualifying income is gross turnover before expenses — not profit. Counts include sole-trader turnover, UK and foreign property rent, your share of jointly owned property, certain trust income and some disguised investment fees. It does not include PAYE salary, partnership profit share, dividends, pensions, basis-period transition profits, REIT/PAIF income, qualifying care relief or one-off non-continuing land transactions.
If you are cash basis and VAT-registered, VAT-inclusive income counts. Sam invoices £62,000 and has £18,000 expenses: profit £44,000, but qualifying income £62,000. Priya has £25,000 rent plus £27,000 sole-trade turnover: combined qualifying income £52,000.
Jordan has £55,000 PAYE plus 12,000 freelance: only £12,000 counts. Alex has company salary and dividends plus £28,000 personal rent: only £28,000 counts.
Sole traders, landlords, and combined income
Obligations apply per sole-trader business and per property business. Income from different sources is added together for the threshold test, so a modest rental portfolio plus a growing trade can push you over £50,000. Short first years and odd accounting periods can be annualised.
Partnerships and company directors — what’s out / what’s in
Partnerships are not currently mandated; the start date is still to be confirmed. Partnership profit share does not count toward qualifying income. A partner with separate sole-trade or personal property income can still be mandated. Limited companies are not brought into MTD for Income Tax by the CT600; a director with personal property or a side trade can be in even when the company is not.
Key dates for the 2026–27 tax year
Digital records start from 6 April 2026, or 1 April for calendar-aligned periods. Q1 update: 7 August 2026. Q2: 7 November 2026. Q3: 7 February 2027. Q4: 7 May 2027. Tax return and payment: 31 January 2028. You still file 2025–26 Self Assessment by 31 January 2027.
Sources: https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/before-you-use-this-guide
What you must do differently
Digital records
Each entry needs an amount, date and category mapping to Self Assessment. Compatible software creates, stores and corrects records. Paper notebooks and year-end reconstructions are not enough once mandated.
Quarterly updates (what they are and aren’t)
Each quarter you or your agent send HMRC a summary of income and expense totals. They are not a full tax return, a demand for tax each quarter, or a substitute for the January payment. Future timely-payment ideas are consultation territory, not current law.
Year-end tax return via software
After the fourth update you complete a year-end tax return through compatible software. It picks up other income, reliefs and allowances and finalises the position for payment by 31 January.
Software: choosing compatible tools
HMRC does not supply software. You need a product that can create and store digital records, send quarterly updates and submit the year-end return including other income, reliefs and allowances.
Two routes are all-in-one bookkeeping and MTD software, or spreadsheets plus HMRC-recognised bridging software. Use the official finder: https://www.gov.uk/guidance/find-software-that-works-with-making-tax-digital-for-income-tax. Free and paid options exist. If you use an accountant, agree how the file should be structured before buying a second product.
Penalties and the 2026–27 soft landing
MTD for Income Tax uses a points-based late-submission regime and proportionate late-payment penalties.
Soft landing for 2026–27
For the first mandated year there are no penalty points for late quarterly updates. You must still submit every update before filing the year-end return, and points do apply if the tax return itself is late. The soft landing is breathing room, not permission to ignore Q1.
How points work later
There is one point per missed quarterly update or return deadline. Four points trigger a £200 penalty, then 200 for each further miss. There is a maximum of one point per deadline even with multiple businesses.
Late payment
Interest can run from day one that payment is late. Penalties ramp by how late you are; the first year has a more lenient structure. Late-payment penalties do not apply to payments on account, though interest can. Source: https://www.gov.uk/guidance/penalties-for-making-tax-digital-for-income-tax
Exemptions and when you can opt out
Some people are automatically exempt; others can apply. Examples include qualifying income of 20,000 or less, no National Insurance number before the start of the tax year, and certain trust and personal representative returns. Some cases have time-limited deferrals to April 2027.
You can apply for digital exclusion where age, disability, location or religious beliefs make digital impractical. Habit, unfamiliarity, few transactions, and extra time or cost alone are not enough. Once in the regime, you can opt out if qualifying income stays below the relevant threshold for three consecutive years. Source: https://www.gov.uk/guidance/find-out-if-you-can-get-an-exemption-from-making-tax-digital-for-income-tax
Landlord specifics: joint ownership and easements
Joint landlords are assessed on their share of property income for the threshold and reporting. HMRC easements can simplify quarterly reporting in some joint-ownership cases. Confirm your share of gross rents, check software supports the options you need, read https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/before-you-use-this-guide and the step-by-step landlord collection, and ask your accountant how expenses and year-end adjustments will be handled. Foreign property is a separate property business from UK property.
Practical checklist if you’re already in (or HMRC signed you up)
1. Confirm qualifying income from your 2024–25 return.
2. Sign up: https://www.gov.uk/guidance/sign-up-for-making-tax-digital-for-income-tax
3. If HMRC auto-signed you up, follow: https://www.gov.uk/guidance/check-what-to-do-if-hmrc-has-signed-you-up-for-making-tax-digital-for-income-tax
4. Choose compatible software or bridging and authorise it.
5. Map each income source: MTD, PAYE, dividends and partnership share.
6. Get digital records live from 6 April 2026 (or 1 April calendar-aligned).
7. Diary the quarterly deadlines, especially 7 August 2026.
8. Keep filing 2025–26 Self Assessment by 31 January 2027.
9. Plan the year-end return and payment for 31 January 2028.
10. If Q1 is late, submit it before the year-end return; soft landing does not remove the data trail requirement.
Preparing if you’re under £50k now but over £30k next
If 2024–25 qualifying income was £50,000 or less, you are not in the April 2026 cohort. More than £30,000 in 2025–26 means starting 6 April 2027; more than £20,000 in 2026–27 means starting 6 April 2028. Use the spare year to clean bookkeeping categories, decide all-in-one versus bridging, separate personal and property bank feeds, check joint-ownership shares, and agree agent authorisation.
How Easey can help
Easey Accounts is an Essex-based ACCA / MAAT practice working with owner-managed businesses, sole traders and landlords across Essex, Kent, London and the wider UK. For clients in MTD for Income Tax, we file quarterly updates and keep the year-end return aligned with the digital record — not as a separate January scramble.
Get a quote: https://tally.so/r/7RRjpA
Phone: 020 3576 5278
Our services: /services
Who we help: /who-we-help
We work from your last return and live records, not a generic checklist.
FAQs
Do I need MTD if my profit is under £50,000 but turnover isnt?
Yes, if gross qualifying income from self-employment and/or property is above the threshold. MTD looks at turnover before expenses, not profit.
Does rental income plus freelance income get added together?
Yes. Gross rents and sole-trade turnover are combined for the qualifying-income test.
Are quarterly updates the same as a tax return? Do I pay tax each quarter?
No. Quarterly updates are income and expense totals only. They do not trigger payment; you still file a year-end return via software and pay by January.
What happens if I miss 7 August 2026?
For 2026–27 there are no penalty points for late quarterly updates, but you must submit before the year-end return. Do not skip Q1.
Do partnerships or LLPs need MTD in 2026?
Partnerships are not currently mandated; the timeline is unconfirmed. Separate sole-trade or personal property income can still bring a partner into MTD.
Can I still use Excel or Google Sheets?
Yes, with HMRC-recognised bridging software. Spreadsheets alone are not enough once mandated.
What software does HMRC recommend?
HMRC does not recommend a single product; its finder lists compatible free and paid software: https://www.gov.uk/guidance/find-software-that-works-with-making-tax-digital-for-income-tax
Does MTD apply if I’m employed with a side hustle?
Only self-employment and/or property gross income counts. PAYE salary does not.
How do joint landlords report?
Each owner is assessed on their share. Easements can simplify some reporting; confirm your software and agent can handle joint ownership.
When do the £30,000 and £20,000 thresholds hit?
More than £30,000 in 2025–26 means starting 6 April 2027; more than £20,000 in 2026–27 means starting 6 April 2028.
Will HMRC sign me up automatically?
From September 2026 HMRC begins signing up people required for 2026–27 based on more than £50,000 qualifying income in 2024–25. Follow its guidance if you receive notice.
What’s the difference between MTD for VAT and MTD for Income Tax?
MTD for VAT covers VAT returns. MTD for Income Tax covers Self Assessment for sole traders and landlords: digital records, quarterly updates and a year-end Income Tax return. Being in one does not automatically put you in the other.
Sources and review
Last reviewed: 10 September 2026
Author: Easey Accounts (ACCA / MAAT practice)
Key sources:
https://www.gov.uk/government/collections/making-tax-digital-for-income-tax
https://www.gov.uk/guidance/find-out-if-and-when-you-need-to-use-making-tax-digital-for-income-tax
https://www.gov.uk/guidance/work-out-your-qualifying-income-for-making-tax-digital-for-income-tax
https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/before-you-use-this-guide
https://www.gov.uk/guidance/find-software-that-works-with-making-tax-digital-for-income-tax
https://www.gov.uk/guidance/penalties-for-making-tax-digital-for-income-tax
https://www.gov.uk/guidance/sign-up-for-making-tax-digital-for-income-tax
Uncertainty notes: joint-property easement detail can vary by software; partnership mandation date remains unset; future quarterly payment timing is consultation territory, not a current obligation.
CTA: Get a quote https://tally.so/r/7RRjpA · 020 3576 5278 · /services /who-we-help