A practical guide for sole traders and landlords.
Making Tax Digital for Income Tax is the biggest change to UK self-assessment in a generation. From April 2026, sole traders and landlords with qualifying income above £50,000 must keep digital records and submit four updates to HMRC every year, plus a Final Declaration to replace the old Self Assessment return.
The threshold falls to £30,000 from April 2027, and £20,000 from April 2028. This page sets out who is affected, what is actually changing, what the deadlines are, and what we will handle for you if you would rather not deal with it yourself.
A phased rollout based on qualifying income.
MTD for Income Tax is being introduced in three phases. HMRC identifies who is in scope from your tax return for the year two years before each phase begins — so the April 2026 cohort is identified from the 2024/25 tax return that was filed by 31 January 2026.
Identified from the 2024/25 tax return filed by 31 January 2026.
Identified from the 2025/26 tax return.
Identified from the 2026/27 tax return.
If your qualifying income exceeds the threshold for the relevant tax year, you will be required to comply from the start of the following tax year and stay in the regime — even if your income later falls. The rules allow an exit only when your qualifying income has been below the threshold for three consecutive tax years, which is designed to stop people opting in and out as turnover fluctuates.
If your income is below £50,000 today but you expect it to cross the threshold in the next year or two, the practical advice is to start preparing now rather than scrambling later. Digital records take time to set up properly, and last-minute compliance is where errors creep in.
HMRC writes directly to taxpayers it has identified as in scope, usually a few months before the start of the relevant phase. If you have not heard from HMRC but believe you are affected, the responsibility to comply still sits with you.
Are you in scope? Find out in 30 seconds.
Two questions, instant answer. No signup. Based on the published HMRC rules — not a quote, not a substitute for advice.
1. What kind of income do you receive?
Qualifying income is gross, not profit.
This is the area where most sole traders and landlords get it wrong. Qualifying income is the combined gross income from your self-employment and your property — turnover and rent before any expenses are deducted. It is not your profit. It is not your taxable income. It is the top line on your accounts.
Income from employment under PAYE does not count. Neither does income from a partnership, although partners can be in scope through their separate businesses. Trust and estate income is also excluded.
If you have more than one source — a sole trade and a rental, two sole trades, or any combination — you add them together to test the threshold.
If Sarah were to incorporate her copywriting business and operate it through a limited company, her self-employment income would drop to zero and only the rental income would count. £20,000 is below the current threshold, so she would not be in scope. Decisions about structure can have real consequences for MTD compliance — that is the kind of conversation worth having before April rather than after.
More reporting, not more tax.
The volume of reporting goes up significantly. The amount of tax you owe does not. That is the most important thing to understand before any of the technical detail.
What is changing
- Records must be kept digitally — paper alone is no longer enough.
- Quarterly updates submitted to HMRC, four per income source.
- Annual tax return replaced with a Final Declaration filed via software.
What is not changing
- Tax payment dates remain 31 January and 31 July.
- The amount of tax you owe is calculated the same way.
- You do not pay tax four times a year — quarterly updates are reports, not bills.
The first change — digital records — is a higher bar than it sounds. HMRC's definition does not include paper receipts that get typed into a spreadsheet at year-end. It means each transaction recorded digitally as it happens, with the date, amount, and category captured at source. Spreadsheets are still permitted but only if linked to HMRC through bridging software that creates a continuous digital trail. Re-keying figures from one place to another breaks the digital link and is not compliant.
The second change — quarterly updates — is mechanical. You submit a summary of income and expenses for each business or property four times a year through MTD-compatible software. The submissions are cumulative, so the second quarter's update includes the first quarter's figures, and so on. You can correct earlier quarters in later submissions if needed.
The third change — the Final Declaration — replaces the Self Assessment return at year-end. Once your fourth quarterly update is final, your software pulls the figures together, you make any tax and accounting adjustments, claim your reliefs and allowances, and submit. The deadline stays 31 January. HMRC has confirmed there will be no online portal for this — once you are in MTD, the final return must be filed through software.
Four updates a year, every year.
The four quarterly deadlines are fixed. They do not move with your accounting year-end. Whether your business runs from April to April, January to December, or any other period, the MTD deadlines are the same.
| Quarter | Period covered | Deadline |
|---|---|---|
| Q1 | 6 April – 5 July | 7 August |
| Q2 | 6 July – 5 October | 7 November |
| Q3 | 6 October – 5 January | 7 February |
| Q4 | 6 January – 5 April | 7 May |
| Final Declaration | Whole tax year | 31 January following |
If you have more than one income source — for example a sole trade and a rental property — each one needs its own quarterly update. A landlord with two trades and one property will file twelve updates a year.
There is an alternative election available: calendar quarters that follow normal calendar months rather than the tax year. The deadlines stay the same, but the period ends fall on more familiar dates. The election has to be made in software before your first submission of the tax year, and once chosen for the year you cannot switch.
For VAT-registered businesses already reporting on calendar quarters, aligning the MTD for Income Tax election with your VAT periods often makes practical sense — the income and expense records cover the same period for both obligations.
The soft landing — and what it does not cover.
The easement was introduced to give the first wave of taxpayers room to adjust to a system that has been in development for years and is still being refined as it goes live. It is genuinely useful — but it is also frequently overstated.
The four things it does not cover are worth knowing. The Final Declaration deadline of 31 January 2028 still attracts a penalty point if missed. Late payment penalties — 3% at day 15, an additional 3% at day 30, then 4% per year thereafter — are unaffected by the easement. Volunteer joiners using the pilot do not pay quarterly penalties either, but again the Final Declaration is in scope. And the April 2027 and April 2028 cohorts get no equivalent grace period — they enter under the full points-based regime from day one.
The honest read on the soft landing: it removes the smaller stick during transition, not the bigger ones. Treat the deadlines as binding from the start and the easement is a safety net you will not need.
Not everyone affected has to comply.
There are three categories of relief from MTD for Income Tax: digital exclusion exemptions, deferred categories, and permanent exclusions.
Digital exclusion is the broadest route. Granted by HMRC on application, it covers anyone for whom using a computer to keep records and file submissions is not reasonable or practical — typically because of age, disability, the remoteness of where they live, or sincerely held religious belief. The application is made directly to HMRC, who has 28 days to grant or refuse it. Anyone already exempt from MTD for VAT on these grounds is normally also exempt from MTD for Income Tax, though they will still need to confirm.
Deferred categories cover specific circumstances where MTD has been postponed rather than removed entirely. Non-residents with entries on the SA109 supplementary pages, foster carers, and recipients of qualifying care income are deferred until at least April 2027. Ministers of religion are deferred until April 2029.
Permanent exclusions apply to a smaller list — non-UK resident performers and entertainers, certain cases involving power of attorney, and some trust beneficiaries.
Partnerships are not yet in scope. The government has confirmed an intention to extend MTD to partnerships, but no date has been announced. Limited companies have been ruled out of MTD for Income Tax entirely for the foreseeable future, though MTD for Corporation Tax has also been shelved.
If you think you might qualify for an exemption, the time to find out is now — not after the first deadline has passed.
You will need MTD-compatible software.
The new system runs on software, not paper or HMRC's own portal. Every taxpayer in scope needs MTD-compatible software that can submit quarterly updates and the Final Declaration directly to HMRC's systems through their API.
HMRC publishes a Software Finder listing every product it has approved. The list covers full accounting platforms (Xero, QuickBooks, FreeAgent, Sage), specialist sole-trader and landlord apps, and bridging software for those who want to keep using spreadsheets.
Our standard recommendation is Xero — it is comprehensive, well-supported, and integrates with most of the other tools an owner-managed business uses. But the right software depends on the business. If you already use a different platform, we work with all the major options. If you do not yet have one, we will discuss what fits during your initial call before any decision is made.
What good MTD support looks like — and what we commit to.
These are the things any competent firm handling MTD for Income Tax should deliver. They are our floor, not our ceiling.
- Software set-up, HMRC agent authorisation, and digital record linking handled for you.
- Digital records maintained or overseen throughout the year — no quarterly panics.
- Four quarterly updates submitted to HMRC by every deadline.
- Final Declaration prepared, reviewed, and filed by 31 January.
- One named point of contact who knows your business.
- Proactive deadline communication — you hear from us before it matters, not after.
How this fits into our pricing is straightforward. The mechanics of MTD compliance — the four quarterly submissions and the Final Declaration — are an add-on configurable in our pricing calculator, scaled to your turnover band and the number of income sources. Confidence and Champion clients also get the planning conversation around MTD as part of their existing package — for instance, whether the timing of an asset purchase or a structure change makes sense in the new quarterly rhythm.
The specific way we handle these will refine as we operate the first full cycle. We will tell you honestly how it works once we have done it, not sell you on a process that has not been tested.
Common questions about MTD for Income Tax.
Do I need an accountant for MTD for Income Tax?+
No — but you do need MTD-compatible software, the time to learn it, and the discipline to file four times a year on top of your annual return. Most clients decide the time saved and the certainty of correct submission is worth the fee.
Can I still use a spreadsheet?+
Yes, but only if it is linked to HMRC through bridging software. A standalone spreadsheet — even a well-maintained one — does not meet the digital records requirement on its own.
What happens if my income drops below the threshold?+
You must stay in MTD for Income Tax until your qualifying income has been below the threshold for three consecutive tax years. The rule prevents people opting in and out as turnover fluctuates.
Does MTD apply to landlords?+
Yes. Landlords with rental income above the threshold — or combined property and self-employment income above it — are in scope on the same basis as sole traders. Joint property has a specific easement: each joint owner reports only their share of income, with expenses dealt with at year-end.
I am employed and have a side business. Am I affected?+
Only your self-employment and property income count toward the threshold. PAYE income is excluded. So if your side business or rental brings in more than the relevant threshold on its own, you are in scope; if it does not, you are not.
How much will it cost to have you handle MTD for me?+
It depends on your business. Our pricing calculator includes MTD as a configurable option — the fee scales with turnover band and the number of income sources. We will confirm the exact figure during your initial call.
Want to know if MTD for Income Tax affects you?
Our MTD readiness check is a free 30-minute call. We will tell you whether you are in scope, what your specific obligations look like, what software fits your situation, and what it would cost to have us handle it. There is no obligation and no pressure.
Or call 01249 561 013.