If you're a sole trader or landlord, this one's important. Making Tax Digital for Income Tax (MTD for IT) went live on 6 April 2026, and it marks one of the biggest changes to the UK tax system in a generation. For many of our clients, this is no longer something coming down the line. It's here!
📋 Who Does This Affect Right Now?
Around 864,000 sole traders and landlords are now required to comply with MTD for Income Tax from 6 April 2026, specifically those whose qualifying gross income from self-employment or property exceeded £50,000 in the 2024/25 tax year.
There are further phases to follow. Those with qualifying income over £30,000 will be mandated from April 2027, with the threshold dropping further to £20,000 from April 2028.
🤔 What Does "Qualifying Income" Actually Mean?
This is where a lot of people get caught out. Qualifying income means gross income from self-employment and/or property before any expenses are deducted. So your profit figure isn't what matters here; it's your turnover.
There's another important point worth highlighting. The threshold combines income from different sources. If you have a side business and a rental property, you could already be in scope without realising it. For example, a sole trader with £38,000 trading income and £16,500 in rental income has combined qualifying income of £54,500, placing them firmly in Phase 1.
🔄 What Actually Changes?
Rather than submitting one annual Self Assessment return, the new rules require taxpayers to keep electronic records, submit quarterly reporting of receipts and expenses, and complete the usual end-of-year declaration. A sole trader who is also a landlord will need to file two updates each quarter: one for their trade and one for their property business.
⚠️ What About Penalties?
The good news is there's a soft landing in place. Taxpayers joining in April 2026 will not receive penalty points for late quarterly updates during the first 12 months, though penalty points can still apply for late filing of the 2026/27 year-end MTD tax return.
💻 What Software Do You Need?
HMRC does not provide software for Making Tax Digital for Income Tax. You'll need to use a compatible package. Options include Xero, QuickBooks, FreeAgent, and Sage, all of which offer MTD-compatible solutions for sole traders and landlords.
If you're not sure whether you're in scope, or you need help getting set up with the right software, please do get in touch with your Client Manager. We're here to make this transition as straightforward as possible for you.
You can sign up directly via GOV.UK here: Register for Making Tax Digital for Income Tax