Compliance
Compliance Essentials for UK Sole Traders under Making Tax Digital
Grasp the twelve-month penalty-free transition into MTD for income tax: what sole traders and landlords must do to stay compliant.
By NomadicTax Research Team • 5-8 min read • May 8, 2026
## What is Making Tax Digital (MTD) for Income Tax?
Making Tax Digital is a UK initiative to digitise tax reporting; from **6 April 2026**, sole traders and landlords with income over £50,000 must maintain digital records and submit **quarterly updates** of income and expenses via recognised software. ([gov.uk](https://www.gov.uk/government/news/act-now-864000-sole-traders-and-landlords-face-new-tax-rules-in-two-months?utm_source=openai))
## Key Requirements
- **Eligibility:** Sole traders and landlords earning over **£50,000** (self-employment plus property income) in 2024-25.
- **What to do quarterly:** Income and expenses updates (Q1 through Q4) using HMRC-approved software. The first full MTD tax return due by **31 January 2028**, covering the 2026-27 tax year. ([gov.uk](https://www.gov.uk/government/news/act-now-864000-sole-traders-and-landlords-face-new-tax-rules-in-two-months?utm_source=openai))
## Transition Relief Period
For those joining in **April 2026**, HMRC offers **no penalty points for late quarterly updates in the first 12 months**—buffer for adjustment. ([gov.uk](https://www.gov.uk/government/news/act-now-864000-sole-traders-and-landlords-face-new-tax-rules-in-two-months?utm_source=openai))
## Practical Compliance Tips
- Choose and implement software **before 6 April 2026**. Many vendors have started already.
- Set reminders for quarter‐end updates. Missing one gets 1 penalty point; 4 leads to £200 fine. The grace period avoids points for first year if you're new. ([gov.uk](https://www.gov.uk/government/news/act-now-864000-sole-traders-and-landlords-face-new-tax-rules-in-two-months?utm_source=openai))
- Retain old tax return filing methods for 2025-26 tax year—first full digital tax return begins 2026-27.
## Example Case
*Jane owns two rental units and does freelance graphic design. In 2024-25, her income exceeded £50,000. From April 2026, she must track her property income and freelance expenses digitally. Even if a quarterly update is late in her first year, she won’t get penalty points.*
## Other Recent UK Changes to Note
- The **tax relief for non-reimbursed homeworking expenses** has been removed from **6 April 2026**. Employees can no longer claim household utility costs or business telephone expenses unless employer reimburses. ([gov.uk](https://www.gov.uk/government/publications/agent-update-issue-142/issue-142-of-agent-update?utm_source=openai))
- Tax codes updated: the **basic Personal Allowance** increases to **£12,570** from 6 April 2026. ([assets.publishing.service.gov.uk](https://assets.publishing.service.gov.uk/media/6996e9b3b33a4db7ff889e08/P9X_2026_Tax_codes_to_use_from_6_April_2026.pdf?utm_source=openai))
**Takeaway:** Moving into the digital era with MTD means updating habits, with the first year being forgiving for those newly subject—but staying ahead ensures smooth compliance and fewer headaches.