What You Need to Know Before April 2026
From April 2026, Making Tax Digital (MTD) will become mandatory for many sole traders and landlords. It marks one of the biggest changes to personal tax reporting in decades, so it’s important to understand what it means for you.
Here’s what you need to know.
What Is Making Tax Digital?
In an effort to modernise the UK tax system, HM Revenue & Customs have introduced MTD.
The purpose is to move away from a single annual Self-Assessment return and towards digital record-keeping, with quarterly updates submitted using compatible software.
Who Is Affected
From 6 April 2026, MTD for Income Tax will apply to:
- Sole traders
- Landlords
- Individuals registered for Self-Assessment
If your total gross income from self-employment and/or property exceeds £50,000 per year, you must comply.
From April 2027, the threshold reduces to £30,000.
What Will Change?
If you’re affected, you will need to:
Keep Digital Records
You must maintain digital records of:
• Income
• Expenses
• Property income (if applicable)
Submit Quarterly Updates
Instead of filing once a year, you’ll submit updates every quarter via MTD-compatible software.
These updates summarise:
• Income
• Allowable expenses
This means submitting updates four times a year, followed by a final end-of-year declaration.
Submit a Final Declaration
At the end of the tax year, you’ll confirm your income, make any accounting adjustments and submit a final declaration, which replaces the traditional Self-Assessment tax return.
Important Note – This Is About Reporting, Not Paying
Making Tax Digital changes how and when you report your income, not necessarily when you pay your tax.
Payment deadlines remain aligned with the existing Self-Assessment system, with tax still due on 31 January and 31 July.
What Income Counts Toward the £50,000 Threshold?
The threshold is based on gross income and not profit, this includes:
• Turnover from self-employment
• Rental income before expenses
It does not include employment income taxed under PAYE.
What Are the Risks of Doing Nothing?
If you’re required to comply and fail to:
• Keep digital records
• Submit quarterly updates
• Use compatible software
You could face penalties under HMRC’s new points-based penalty system.
Practical Steps to Take Now
- Review Your Income Level
Confirm whether you exceed the £50,000 threshold. - Assess Your Current Record-Keeping
Are you still paper-based? Using spreadsheets? Using accounting software? - Choose Compatible Software
You will need MTD-compatible software that links directly with HMRC systems. - Improve Your Processes
Quarterly reporting requires discipline. Keeping records up to date will be essential. - Speak to Your Accountant
Planning will prevent issues later.
Common Questions
Will this increase my tax bill?
No, it changes reporting frequency, not tax rates.
What if my income fluctuates?
Eligibility is assessed based on total qualifying income in previous tax years.
If you’d like advice on whether MTD for Income Tax applies to you, or support implementing compliant systems, our team is here to help.
