Making Tax Digital for Income Tax 2026: What Sole Traders and Landlords Need to Do Now

Making Tax Digital for Income Tax 2026 is no longer something to prepare for. It is already here.

Since 6 April 2026, qualifying sole traders and landlords have been required to keep digital records and send quarterly updates to HMRC using compatible software.

And September 2026 is an important point in the rollout.

HMRC has now started signing up, in stages, people who should already be using Making Tax Digital for Income Tax but have not registered themselves.

So if you are self-employed, a landlord, or both, now is the time to understand whether the rules apply to you.

Because this is not simply a different way to submit the same January tax return.

It changes how you keep records throughout the year.

What is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax — often shortened to MTD for Income Tax — is HMRC's new digital reporting system for individuals with qualifying self-employment or property income.

If you fall within the rules, you need compatible software to:

• create and maintain digital records of your business or property income and expenses;
• send quarterly updates to HMRC;
• make any necessary adjustments; and
• ultimately submit your tax return through compatible software.

Quarterly updates are summaries of the information held in your digital records. They are not four additional tax returns and you do not normally need to make full accounting or tax adjustments before submitting each update.

But they do mean that leaving your bookkeeping untouched until the following January is no longer a workable approach.

Who needs to use Making Tax Digital in 2026?

You need to use Making Tax Digital for Income Tax from 6 April 2026 if:

• you are registered for Self Assessment;
• you receive income from self-employment, property, or both;
• you are not exempt; and
• your qualifying income exceeded £50,000 in the 2024/25 tax year.

The threshold is based on gross qualifying income before expenses, not taxable profit.

That distinction is important.

A landlord receiving £55,000 of rent but making only £20,000 after mortgage costs and other expenses can still fall within MTD.

Likewise, a sole trader with turnover of £60,000 and taxable profit of £25,000 can still be required to use it.

The threshold looks at income, not profit.

Self-employment and property income are added together

This is one of the easiest parts of the rules to misunderstand.

Qualifying income is broadly your combined gross income from self-employment and property.

Imagine you have:

Freelance turnover: £32,000 Gross rental income: £21,000

Neither source exceeds £50,000 individually.

But together:

£32,000 + £21,000 = £53,000

That may bring you within Making Tax Digital from April 2026 if those amounts relate to the relevant 2024/25 tax return.

Other types of income do not generally form part of this qualifying-income calculation.

For example, HMRC excludes sources such as:

• PAYE employment income;
• dividends;
• pension income; and
• an individual's share of partnership profit.

So somebody earning a £60,000 salary plus £15,000 from freelance work would not automatically enter MTD simply because their total personal income exceeds £50,000.

The MTD thresholds are falling

The £50,000 threshold is only the first stage.

The rollout is:

That means many sole traders and landlords who are outside the system today will be brought into it over the next two tax years.

A landlord with £35,000 of qualifying rental income might not need MTD in 2026/27 but could be required from 6 April 2027.

Someone with £24,000 of qualifying income could enter from 6 April 2028.

So even if MTD does not apply to you today, it may be worth changing your record-keeping process before it becomes compulsory.

What are the MTD quarterly deadlines?

For most people using the standard tax-year periods, the quarterly deadlines are:

Businesses using calendar-aligned periods can instead use:

Importantly, HMRC's quarterly updates are cumulative: each update covers the year from the start of the tax year to the end of the relevant update period.

That allows corrections to feed into later updates rather than requiring businesses to continually reopen previous submissions.

It is September 2026. What if you missed the first MTD deadline?

The first quarterly deadline was 7 August 2026.

If you should have been using MTD but missed it, do not ignore the problem.

There is some breathing room in the first year.

HMRC has confirmed that no penalty points will be issued for late quarterly updates during the 2026/27 tax year.

But that does not mean the quarterly updates are optional.

You still need to:

1. get your records into compatible software;
2. make sure your MTD registration is correct;
3. connect the software to HMRC;
4. submit any outstanding quarterly information; and
5. continue with future updates.

You will need to have submitted the required quarterly updates before you can complete the relevant tax return.

So the sensible response to a missed first deadline is not panic.

It is to catch up now.

The next deadline is 7 November 2026

For businesses already within MTD, the next quarterly submission deadline is 7 November 2026.

That makes September and October an ideal time to fix the bookkeeping rather than waiting until the first week of November.

If your accounts currently consist of:

a spreadsheet,

bank statements,

an envelope of receipts,

and several months of transactions that have not been categorised,

this is the point to address it.

Making Tax Digital works best when record keeping happens continuously rather than being reconstructed immediately before a deadline.

HMRC may sign you up automatically

This is particularly relevant now.

From September 2026, HMRC has begun signing up people who should be using Making Tax Digital for Income Tax in 2026/27 but have not already registered.

HMRC is doing this in stages where its records show qualifying income above £50,000 for 2024/25.

Being automatically signed up does not mean everything else is taken care of.

You still need appropriate software and you still need to use it correctly.

If HMRC contacts you to say you have been signed up, check the details promptly rather than assuming your existing Self Assessment process can simply continue unchanged.

What records need to be digital?

MTD requires digital records of relevant self-employment and property income and expenses.

That does not mean every piece of supporting evidence must disappear into the cloud.

You still need to retain the normal supporting documentation required for Self Assessment, such as invoices, statements and receipts.

But the underlying income and expense records used for MTD must be maintained through compatible digital software.

Where more than one software product is used, the required records need appropriate digital links between them rather than repeatedly being copied and pasted manually.

For many small businesses and landlords, the simplest approach is one cloud accounting system connected directly to the business bank account.

It is considerably easier to reconcile transactions each week or month than rebuild twelve months of records after the event.

Can you still use spreadsheets for Making Tax Digital?

Potentially.

MTD does not automatically ban spreadsheets.

HMRC recognises software solutions that can connect existing records, including spreadsheets, to the MTD system.

But there is an important difference between:

keeping a well-designed digital spreadsheet connected through compatible bridging software

and

typing numbers into Excel once a year from a pile of bank statements.

The first may form part of a compliant digital process.

The second is not the direction MTD is moving towards.

For businesses with significant transaction volume, multiple properties or several bank accounts, dedicated bookkeeping software is usually much easier to manage.

Does MTD mean paying tax every quarter?

No.

This is one of the biggest misconceptions.

Quarterly updates do not currently mean quarterly Income Tax payments.

The normal deadline for paying the balancing amount of Self Assessment tax remains 31 January following the end of the tax year, together with payments on account where applicable.

But MTD can give you something potentially more valuable:

a much clearer idea of the tax bill before January arrives.

If the bookkeeping is current throughout the year, your accountant can estimate the likely tax position much earlier.

That means you can reserve cash instead of discovering the liability after the money has already been spent.

What does MTD mean for landlords?

Landlords are one of the groups most affected by the change.

A landlord who previously sent their accountant:

twelve monthly mortgage statements,

a spreadsheet of rent,

a folder of invoices,

and a list of expenses once a year

may now need a much more regular digital process.

This becomes particularly important for landlords with:

• multiple properties;
• jointly owned property;
• both UK and overseas property income;
• a combination of property and self-employment income; or
• significant finance costs.

Remember that MTD qualifying income is based on gross property income before expenses, rather than the taxable rental profit after allowable costs.

For portfolio landlords, that can make the threshold arrive much sooner than expected.

What does MTD mean for sole traders?

For sole traders, the biggest practical change is frequency.

If your current bookkeeping routine is:

"I'll sort it before my tax return"

MTD forces a different discipline.

That may feel like additional administration.

But done properly, it can actually improve the business.

Instead of learning once a year that:

your margin has fallen,

expenses have increased,

a customer owes you money,

or the tax reserve is too small,

you can see those problems while there is still time to act.

The bookkeeping required for compliance can also become useful management information.

That is when MTD stops being purely an HMRC exercise.

MTD does not replace good bookkeeping

Submitting four sets of numbers does not make those numbers accurate.

If transactions are categorised incorrectly throughout the year, submitting them more frequently simply sends inaccurate information more frequently.

The underlying process still matters.

Good digital bookkeeping should include:

Bank reconciliation Transactions in the accounting records should agree to the bank.

Supporting documentation Invoices and receipts should be retained and attached where practical.

Correct categorisation A loan repayment is not the same as an expense. Capital expenditure is not always treated like an everyday purchase.

Review of personal expenditure Personal transactions should not simply be included as business costs because they passed through the business account.

Regular tax review Bookkeeping should ultimately help estimate profit and tax, not merely fulfil a quarterly submission requirement.

MTD changes the frequency.

It does not remove the need for judgement.

What happens to the annual Self Assessment return?

Making Tax Digital does not make the annual tax position disappear.

You still need to finalise your tax affairs after the year ends.

That includes making relevant accounting and tax adjustments and reporting other income that may not have formed part of the quarterly updates.

For someone who entered MTD on 6 April 2026, the first MTD year is the 2026/27 tax year.

The final tax return and tax payment for that year are therefore due by 31 January 2028.

Separately, the 2025/26 Self Assessment return is still due by 31 January 2027 under the previous process.

Keeping those two years separate is important during this transitional period.

Are there penalties for Making Tax Digital?

Eventually, yes.

However, HMRC has introduced a softer approach for quarterly submissions in the first mandatory year.

For 2026/27, there are no penalty points for missing quarterly-update deadlines.

From later tax years, the MTD late-submission regime becomes points based.

For quarterly obligations, taxpayers can receive a penalty point for a missed deadline. Once the relevant four-point threshold is reached, HMRC can charge a £200 penalty, with further £200 penalties for additional missed obligations while the taxpayer remains at the threshold.

The first year should therefore be treated as an opportunity to get the process working properly rather than as a reason to postpone it.

Can you be exempt from Making Tax Digital?

Some taxpayers are automatically exempt, while others can apply for exemption.

One important category is digital exclusion — where it would not be reasonable for someone to use digital tools because of their circumstances.

There are also specific exemptions relating to particular taxpayer groups and situations.

Being uncomfortable with accounting software, on its own, should not simply be assumed to create an exemption.

If you believe an exemption applies, check the precise HMRC rules and apply where required.

What should sole traders and landlords do now?

If your qualifying income exceeded £50,000 in 2024/25:

Check your MTD status now.

Do not wait until January.

Then:

Confirm your software is MTD compatible.

If you already use accounting software, do not assume that automatically means your specific setup is ready for MTD Income Tax.

Get the bookkeeping current.

If April-to-date records are still incomplete, fix them now while the volume is manageable.

Submit any outstanding update.

The first deadline has passed, but there are no late quarterly-update penalty points in 2026/27.

Prepare for 7 November.

The second update is approaching.

Review your tax reserve.

One advantage of more current bookkeeping is having a better view of the likely tax liability.

And what if your income is between £30,000 and £50,000?

Start preparing now.

If your qualifying income for 2025/26 exceeds £30,000, MTD becomes mandatory from 6 April 2027.

That gives you time to choose software, clean up your bookkeeping process and avoid learning the system during your first compulsory quarter.

The same principle applies to those approaching the £20,000 threshold that takes effect from April 2028.

The worst MTD strategy is to wait until the first deadline arrives.

Frequently asked questions about Making Tax Digital for Income Tax

Is Making Tax Digital compulsory in 2026?

Yes, for qualifying sole traders and landlords whose combined qualifying self-employment and property income exceeded £50,000 in 2024/25, unless an exemption applies.

Is the £50,000 MTD threshold based on profit or turnover?

It is based on qualifying gross income before expenses, not taxable profit.

Do rental income and self-employment income get added together?

Yes. Relevant gross self-employment and property income are generally combined when determining qualifying income.

Do PAYE salary and dividends count towards the MTD threshold?

Generally no. Employment income, dividends and several other types of income do not form part of qualifying income for this purpose.

Do I have to submit a tax return four times a year?

No. Quarterly updates are summaries of the digital records held for your self-employment or property business. They are not four complete tax returns.

Do I pay Income Tax quarterly under MTD?

Not simply because of MTD. The normal Self Assessment payment timetable continues, although payments on account may still apply.

What if I missed the 7 August 2026 quarterly deadline?

Catch up as soon as possible. HMRC is not issuing penalty points for late quarterly updates in the 2026/27 tax year, but you still need to submit the required information.

What is the next MTD deadline?

For the 2026/27 tax year, the next quarterly deadline after 7 August is 7 November 2026.

Can my accountant manage MTD for me?

Yes. An authorised agent can carry out much of the MTD process on your behalf, including signing up eligible clients and making submissions through compatible software.

You still need to provide complete and timely information so that the underlying records remain accurate.

The Solutio approach

Making Tax Digital should not mean paying someone simply to press "submit" four extra times a year.

If the records are being maintained quarterly anyway, they should give you something useful in return.

For a sole trader, that might mean knowing:

What am I actually earning after costs?

How much should I put aside for tax?

Can I afford this purchase?

For a landlord:

What is each property really generating?

What will Section 24 do to my tax bill?

How much cash is actually available after tax and finance costs?

The compliance requirement is changing.

The opportunity is to turn that requirement into better financial information throughout the year.

Because the real benefit of keeping your numbers current is not that HMRC receives them sooner.

It is that you see them sooner too.