From 6 April 2026, the way many self-employed individuals and landlords report income to HM Revenue & Customs will change significantly.

Making Tax Digital (MTD) for Income Tax is part of the government’s plan to modernise the UK tax system. While the rules may sound complicated, the core idea is simple: move from paper-based or annual reporting to digital record-keeping with more regular updates.

This guide explains what’s changing, who it affects, and what you need to do — in straightforward terms.

Who Will Need to Comply?

MTD for Income Tax is being introduced in phases:

From 6 April 2026

You must comply if your combined gross income from:

• Self-employment (sole trader business), and/or
• UK property rental income

is over £50,000 per year.

From 6 April 2027

The threshold reduces to £30,000.

From 6 April 2028

The threshold reduces again to £20,000.

Important points:

• The threshold is based on total income before expenses, not profit.
• If you are both a sole trader and a landlord, the income is combined.
• HMRC will assess your eligibility based on your submitted tax return.
• If your income is below the threshold, you will remain under the current Self Assessment system (unless you choose to join voluntarily).

What Is Changing?

Currently, most sole traders and landlords submit one Self Assessment tax return per year.

Under MTD, you will need to:

• Keep digital records of your income and expenses.
• Submit quarterly updates to HMRC.
• Submit an End of Period Statement (EOPS).
• Submit a Final Declaration, confirming your overall income and tax position.

This means instead of sending everything once a year, you will report income and expenses throughout the year using approved software.

What Does “Quarterly Updates” Mean?

Quarterly updates are summaries of:

• Income received
• Business or property expenses incurred

They are not full tax returns and do not require final tax calculations each time.

For example, if your accounting period follows the tax year, your quarterly deadlines may be:

• 5 August
• 5 November
• 5 February
• 5 May

After the fourth quarterly submission, you will still complete your year-end process.

Will You Pay Tax Four Times a Year?

No.

This is one of the biggest misconceptions.

• Tax payment dates remain 31 January and 31 July (for payments on account).
• You are still taxed on annual profit.
• The quarterly updates are for reporting purposes only.

The amount of tax you pay and when you pay it does not automatically change under MTD.

MTD for Sole Traders

If you are self-employed, MTD mainly affects how you keep records and submit information.

What You’ll Need to Do

• Record all business income digitally (sales, fees, etc.)
• Record allowable expenses digitally (travel, materials, insurance, etc.)
• Submit quarterly summaries
• Complete your year-end declaration

If you currently use paper records or basic spreadsheets without digital links, you will need to move to MTD-compatible software.

Practical Impact for Sole Traders

MTD encourages more up-to-date bookkeeping. This can actually help you:

• Understand how profitable your business is during the year
• Avoid large unexpected tax bills
• Plan ahead for VAT or growth
• Improve financial organisation

For many sole traders, the biggest adjustment is simply building a routine of regular record-keeping.

MTD for Landlords

Landlords above the income threshold will also fall within MTD.

This applies whether you:

• Own one rental property or several
• Let residential or commercial property
• Have furnished or unfurnished lets
• Combine property income with self-employment income

What You’ll Need to Record

• Rental income received
• Mortgage interest (where applicable)
• Repairs and maintenance
• Letting agent fees
• Insurance
• Other allowable expenses

All records must be kept digitally and submitted quarterly.

If you own multiple UK properties, they can usually be reported together as one property business. Overseas property income is reported separately.

Recommended Software: Xero

We recommend Xero as a practical and reliable MTD-compatible solution for sole traders and landlords.

Xero allows you to:

• Connect your bank account securely
• Automatically import transactions
• Categorise income and expenses easily
• Capture receipts using a mobile app
• View real-time financial reports
• Submit MTD updates directly to HMRC

Using cloud accounting software simplifies compliance and provides greater clarity over your finances.

As part of our service, we can:

• Set up your Xero account correctly
• Provide training
• Review your records
• Handle quarterly submissions on your behalf

Are There Any Exemptions?

Exemptions are limited but may apply if you are digitally excluded due to:

• Age
• Disability
• Religious reasons
• Lack of internet access

You must apply to HMRC and receive formal confirmation if you believe you qualify.

What Should You Do Now?

Even if April 2026 feels far away, early preparation is strongly advised.

Practical Steps:

• Check whether your income exceeds the threshold.
• Review how you currently keep records.
• Move to MTD-compatible software.
• Start maintaining digital records now.
• Speak to your accountant about a transition plan.

The earlier you switch, the easier the transition will be.

Final Thoughts

Making Tax Digital for Income Tax is a significant change, but it does not need to be overwhelming.

The fundamentals of tax remain the same — what changes is the reporting process.

With the right support and software in place, MTD can improve financial visibility, reduce last-minute stress, and create better control over your business or rental income.

If you are a sole trader or landlord and would like guidance on preparing for April 2026, we are here to help. Contact our team to discuss how we can ensure you are fully compliant and confident well before the deadline.