Compliance
Getting Up to Speed with Making Tax Digital: Compliance for Sole Traders & Landlords
Starting 6 April 2026, many sole traders and landlords must use digital record-keeping and send quarterly updates under the MTD for Income Tax regime—with new penalties taking effect for repeat late submissions.
By NomadicTax Research Team • 7 min read • May 25, 2026
## What Is Making Tax Digital (MTD) for Income Tax?
Making Tax Digital for Income Tax is the UK’s framework aiming to modernise how income from self-employment and property is reported to HMRC. It moves away from annual paper-based returns towards quarterly digital reporting using compatible software. ([gov.uk](https://www.gov.uk/government/publications/get-ready-for-making-tax-digital-for-income-tax/benefits-of-making-tax-digital?utm_source=openai))
## Who Is Required and When
- From **6 April 2026**, those sole traders and landlords whose combined gross self-employment and property income exceeds **£50,000** must comply. ([gov.uk](https://www.gov.uk/government/publications/budget-2025-overview-of-tax-legislation-and-rates-ootlar/budget-2025-overview-of-tax-legislation-and-rates-ootlar?utm_source=openai))
- In **April 2027**, the threshold drops to **£30,000**, and in **April 2028**, to **£20,000**. That brings more people into the scheme steadily. ([gov.uk](https://www.gov.uk/government/publications/making-tax-digital-for-income-tax-self-assessment-reducing-the-mandation-threshold-from-30000-to-20000-from-april-2028?utm_source=openai))
- Some taxpayers may be exempt if they are **digitally excluded** or meet other criteria. Exemption applications are possible, and HMRC provides guidance. ([gov.uk](https://www.gov.uk/guidance/apply-for-an-exemption-from-making-tax-digital-for-income-tax?utm_source=openai))
## Penalties and Your Responsibilities
New penalties take effect for those required under MTD:
- **Late submission penalties** will be **points-based**—one point per missed deadline. Only when you reach the threshold do you face a financial penalty (e.g. 4 points = £200). One-off lateness won’t immediately cost money. ([gov.uk](https://www.gov.uk/guidance/penalties-for-making-tax-digital-for-income-tax?utm_source=openai))
- **Late payment penalties** are more structured: shorter period deadlines (15 or 30 days depending on year or status) determine escalating percentages of the owed tax. Interest continues to compound from day one of lateness. ([gov.uk](https://www.gov.uk/guidance/penalties-for-making-tax-digital-for-income-tax?utm_source=openai))
## What You Should Do Now
- **Choose compatible software** now if you haven’t already. It’s essential for digital records and quarterly updates.
- **Map your cash flow**: because penalties depend on when you miss deadlines or payments, planning ahead for quarterly updates and balancing payments will help.
- **Talk to your agent**: accountants, bookkeepers—or if you do your own books—get support to understand your deadlines.
- **Apply for exemption if needed**: those with limited digital access or other qualifying conditions can apply; ensure you do this **before** the deadline. ([gov.uk](https://www.gov.uk/guidance/apply-for-an-exemption-from-making-tax-digital-for-income-tax?utm_source=openai))
## Real-Life Example
Suppose you’re a landlord earning £55,000/year from properties alone (no business income). Since April 2026, you're required to use MTD. If you miss two quarterly updates over the first year, you’ll have accumulated points (2 points) but **no immediate financial penalty**. If you miss again to reach 4 points, you’ll incur a fixed penalty (e.g. £200) for reaching the threshold. For late payments, say you owe additional tax at Self Assessment, and you pay 40 days late: expect escalating penalties and interest. Planning and early payment avoid escalation.
## Why It Matters
Enforcing compliance through MTD helps reduce tax gap, improve documentation accuracy, and eventually simplifies your annual Self Assessment. It’s also increasingly being used to phase in digital obligations for a wider taxpayer base. For sole traders and small landlords, getting in line early means fewer surprises, smoother cash flow, and better interactions with HMRC.