Making Tax Digital for Income Tax: What UK Sole Traders and Landlords Need to Know by 2026
- Published: 4 May 2026
- 12 min read
- Running a Business, Tax & VAT, Property
Ruth Dsouza
Author
Ruth Dsouza Prabhu is a content developer who specialises in crafting clear, compelling narratives from complex ideas. With expertise in marketing communications and lifestyle writing, she simplifies business concepts for a wide audience. Her writing blends strategy, storytelling, and thought leadership, always with a focus on clarity, credibility, and meaningful impact.
Mosan Ali
Reviewer
Mosan Ali is our Accounting Manager based in the UK and has a wealth of knowledge of UK GAAP, VAT, and PAYE. With 12 years of experience crunching numbers and ensuring compliance, he keeps our financial reporting ship-shape. Think of Mosan as our blog's accounting guru. He carefully reviews our UK-focused content, ensuring it's accurate, up-to-date, and packed with helpful tips for UK businesses. Get your taxes right from day one with our informative blog posts.
Making Tax Digital for Income Tax is a pilot scheme reshaping how UK sole traders and property owners report their earnings, with primary legislation coming into force from 6 April 2026. If your qualifying income exceeds £ 50,000, you’ll need to keep digital records, file for quarterly updates, and a final declaration using suitable software through HM Revenue & Customs. This requirement applies to self-employed but currently excludes partnerships and corporations.
Key Takeaways
- Making Tax Digital for Income Tax becomes mandatory from April 2026 for self employed individuals (sole traders) and landlords earning over £ 50,000, with thresholds decreasing in later phases.
- You’ll need to maintain digital records, submit quarterly updates, and replace Self Assessment with a final declaration to keep your tax affairs in order.
- Early preparation with the right software and processes reduces compliance risks and makes ongoing tax reporting more manageable.
Introduction to Making Tax Digital for Income Tax
Making Tax Digital for Income Tax (MTD for Income Tax) is a government initiative transforming how self-employed sole traders and landlords report their business income and expenses to HMRC. Starting from 6 April 2026, those with qualifying income over £ 50,000 from self-employment and UK property income will be required to comply with MTD rules. This phased approach aims to modernise the UK tax system, improve accuracy, and streamline tax digital software usage.
Making Tax Digital for Income Tax requires you or your authorised agent to use MTD software to:
- Create, store, and maintain accurate digital records of your business and property income and expenses.
- Submit quarterly returns to HMRC summarising income and expenses.
- File a final declaration by 31 January following the end of the tax year, replacing the traditional Self Assessment tax return.
Switching to digital tax reporting can feel overwhelming, especially with new quarterly submissions and software requirements. With Osome, you can handle bookkeeping, MTD-compliant reporting, and filings in one place — explore our accounting services to stay compliant without the extra admin.
Who Will Need To Use Making Tax Digital for Income Tax
You’ll need to use Making Tax Digital for Income Tax if all of the following apply:
- You’re a self-employed sole trader or a landlord registered for Self Assessment.
- You receive income from self-employment, property, or both.
- Your qualifying income is more than £ 20,000.
Making Tax Digital for Income Tax is being introduced in phases starting from 6 April 2026, with the start date depending on your qualifying income in the previous tax year:
Qualifying Income Threshold | Tax Year | Start Date |
|---|---|---|
| Over £ 50,000 | 2024 to 2025 | 6 April 2026 |
| Over £ 30,000 | 2025 to 2026 | 6 April 2027 |
| Over £ 20,000 (planned) | 2026 to 2027 | To be legislated |
Partnerships and incorporated companies are currently excluded but are expected to be included in future phases, with a timeline to be announced later.
You do not need to start using Making Tax Digital for Income Tax until after you have filed your initial Self Assessment tax return, although you have the option to register earlier if you wish.
How to Determine Your Eligibility and Start Date
To check if you need to join MTD for Income Tax and when, use HMRC’s official online eligibility tool. This tool considers your gross qualifying income from self-employment and property in the previous tax year and applies phased thresholds:
- Over £ 50,000 from 6 April 2026
- Over £ 30,000 from 6 April 2027
- Over £ 20,000 from 6 April 2028 (planned legislation)
Corporation tax is currently excluded but is expected to be included at a later date.
HMRC will review your Self Assessment tax return annually to assess qualifying income and notify you if you must start using Making Tax Digital for Income Tax. If you do not receive a notification, it remains your responsibility to verify eligibility and sign up accordingly.
Preparing for Making Tax Digital for Income Tax Compliance
Before your start date, you should:
- Choose and authorise accounting software that complies with Making Tax Digital for Income Tax rules. Your tool should also support virtual record keeping, digital links, and submission of quarterly updates and final declarations.
- If you use multiple software products, ensure they are digitally linked to meet HMRC requirements.
- Agents should set up an agent services account and manage client authorisations for Making Tax Digital compliance.
HMRC does not provide tax digital software; businesses must select from available compatible software options. The government is committed to ensuring free software products are available for small businesses with simple tax affairs.
Your Making Tax Digital checklist
If you are VAT registered, you must sign up for MTD. Here’s what you need to get started with Making Tax Digital.
How to Comply with Making Tax Digital for Income Tax
Once signed up for Making Tax Digital for Income Tax, you or your authorised agent must:
- Maintain digital records of all income and expenses related to self-employment, property income, and other income sources that contribute to your qualifying income.
- Submit quarterly updates to HMRC by the deadlines: 7 August, 7 November, 7 February, and 7 May following each quarter. They are required for standard quarters regardless of your accounting period, though you may elect to report using calendar quarters.
- Submit your spring statement by 31 January following the end of the tax year, which replaces the traditional Self Assessment tax return and includes accounting adjustments such as capital allowances and loss claims.
To manage your compliance effectively:
- Use MTD-compatible software to keep your records up to date and accurate. If you use multiple making tax digital software products, ensure they are digitally linked to meet HMRC requirements.
- Consider using bridging software if necessary to connect existing record-keeping solutions with compatible software that submits updates to HMRC.
- Review and approve files prepared by automated services before submission to ensure accuracy and compliance.
- Manage any changes in your circumstances promptly to maintain compliance.
Automated services can simplify compliance by securely connecting your bank account, logging every transaction, preparing quarterly updates, and assisting with submissions. Many providers offer 24/7 customer support to help with any queries or software use, making the transition to digital tax reporting smoother and less time-consuming.
Accounting Manager
Who is Exempt from Making Tax Digital for Income Tax?
Certain individuals may be exempt from using Making Tax Digital (MTD) for Income Tax due to specific circumstances. If exempt, you do not need to use Making Tax Digital software but must continue to file your Self Assessment tax return as usual.
Types of exemptions
Exemptions fall into two categories:
- Automatic exemptions: Granted by HMRC based on your 2024-2025 tax return details; no application needed.
- Applied exemptions: Require you to apply and provide supporting information and further details.
Both can be permanent (unless your circumstances change) or temporary (valid until at least April 2027).
Automatic permanent exemptions
You are automatically exempt if:
- Your qualifying income is £ 20,000 or less.
- You do not have a National Insurance number.
- You act as a trustee, personal representative, or file on behalf of non-resident companies.
- You are a Lloyd’s member submitting underwriting business returns.
- You are unable to use digital services due to mental or physical incapacity with a legal power of attorney or court-appointed deputy.
Automatic temporary exemptions (until April 2027)
You do not need to use Making Tax Digital for Income Tax until the 2027-2028 tax year if your 2024-2025 tax return includes:
- Averaging relief (e.g., farmers, creative artists).
- Qualifying care relief (e.g., foster or kinship carers).
- Income reported on SA107 (trusts or estates).
- Residence or remittance basis claims on SA109 (non-residents, split year treatment, overseas workday relief).
You can download the official PDF versions of the SA107 and SA109 supplementary pages here:
Exemptions you must apply for
You may apply for an exemption if you are digitally excluded and it is unreasonable for you to:
- Keep digital records.
- Submit quarterly return updates using MTD software for streamlined tax affairs.
Examples include:
- Lack of internet access due to location.
- Religious beliefs incompatible with digital record-keeping
- Physical or mental conditions prevent the use of all the tools.
HMRC will assess applications on a case-by-case basis. Common reasons such as unfamiliarity with the software or a preference for paper returns do not qualify.
Further exemptions are available based on religious beliefs or on a case-by-case basis. You can apply on your own behalf or for a family member or friend.
Additional Notes
- If you are exempt from Making Tax Digital for Income Tax for Value-Added Tax (VAT) due to digital exclusion, contact HMRC to confirm if this applies to Income Tax.
- Non-UK resident foreign entertainers or sportspeople must apply for an exemption.
- Some exemptions require you to apply if you expect to claim certain reliefs or use specific supplementary pages in future returns.
Simplify your self-assessment registration process
Take the stress out of tax season with our expert guidance. Let us help you navigate self-assessment registration smoothly. Schedule a consultation now.
Penalties and Compliance Expectations
Meeting deadlines for Making Tax Digital for Income Tax activities is crucial to avoid penalties. Here’s what you need to know about deadlines, penalties, and how to manage late payments under the new rules.
Submission and payment deadlines
You must submit your tax return and pay any tax owed by 31 January after the tax year ends. For the 2026-2027 tax year, there are no penalties for missing quarterly update deadlines, but you still need to keep digital records and submit updates before filing your tax return. Quarterly update deadlines are:
- 7 August
- 7 November
- 7 February
- 7 May
Penalties for late submissions and payments
From tax years after 2026-2027, a points-based penalty system applies for late submissions. Each missed quarterly update or tax return deadline adds one penalty point. Reaching 4 points triggers a £ 200 penalty plus £ 200 for each additional missed deadline. This is separate from those for VAT. Therefore, the income tax penalty is applicable regardless of whether you meet the VAT threshold.
Late penalties apply in proportion to the delay, excluding payments on account. Interest is charged daily on overdue amounts. The table below outlines penalties for late payments:
Penalties for 2026 to 2027 tax year | Penalties for 2027 to 2028 tax year | |
|---|---|---|
| Payment up to 15 days late | No penalty | No penalty |
| Payment 16 to 30 days late | 3% of tax owed at day 15, or no penalty if first year | 4% of tax owed at day 15, or no penalty if first year |
| Payment 31 days or more late | 3% of tax owed at day 15, plus 3% at day 30, plus 10% annual rate charged daily from day 31 (up to 2 years) | 4% of tax owed at day 15, plus 3% at day 30, plus 10% annual rate charged daily from day 31 (up to 2 years) |
Managing penalties and appeals
If you cannot pay on time, contact HMRC promptly to arrange a payment plan and avoid penalties. Penalties are suspended once a payment plan is agreed upon and followed, but failure to comply may result in charges.
Penalty points below 4 expire after 24 months. To remove all points after reaching 4, you must submit all updates and returns on time for 12 months and clear outstanding submissions for the previous 24 months.
You can check your penalty status via your HMRC online services account.
If you disagree with a penalty or point total, HMRC will send instructions on how to appeal.
How Osome Can Help
Adapting to Making Tax Digital for Income Tax can be challenging for landlords, freelancers, tech startups, and ecommerce businesses. Osome makes it easier with digital bookkeeping, automated quarterly submissions, and final declarations tailored to your unique needs.
Whether you manage properties, juggle clients, scale a startup, or run an online store, Osome helps you:
- Keep accurate digital records effortlessly
- Submit quarterly updates on time
- File your final declaration confidently
- Access real-time financial insights
- Get expert support when needed
Stay compliant with HM Revenue & Customs while focusing on growing your business, not paperwork. For personalised guidance on preparing for Making Tax Digital for Income Tax, contact our experts.
Summary
Think of Making Tax Digital for Income Tax as a shift from once-a-year reporting to a continuous, real-time view of your finances. The sooner you move to digital record-keeping and quarterly reporting, the easier it becomes to stay organised, avoid last-minute stress, and reduce the risk of errors or penalties. Taking action now — even before the 2026 deadline — puts you in control of your tax obligations as the system evolves.
Ruth Dsouza Prabhu is a content developer who specialises in crafting clear, compelling narratives from complex ideas. With expertise in marketing communications and lifestyle writing, she simplifies business concepts for a wide audience. Her writing blends strategy, storytelling, and thought leadership, always with a focus on clarity, credibility, and meaningful impact.
