Compliance
How Making Tax Digital for Income Tax Will Affect Sole Traders & Landlords from April 2026
Starting 6 April 2026, many sole traders and landlords will face digital record-keeping and quarterly reporting—here’s how to prepare and stay compliant.
By NomadicTax Research Team • 5-8 min read • April 22, 2026
## Overview of MTD for Income Tax (ITSA)
From **6 April 2026**, sole traders and landlords with **gross income over £50,000** from self-employment and/or UK property will be **legally required** to use **Making Tax Digital (MTD) for Income Tax Self Assessment**. That includes keeping digital records, using MTD-compatible software, and filing **quarterly updates** in addition to the annual return. ([gov.uk](https://www.gov.uk/government/news/one-year-until-making-tax-digital-for-income-tax-launches?utm_source=openai))
In **April 2027**, the threshold drops to **£30,000**, and then to **£20,000** in **April 2028**. ([gov.uk](https://www.gov.uk/government/news/one-year-until-making-tax-digital-for-income-tax-launches?utm_source=openai))
## Compliance Requirements Below and Above the Thresholds
- If your gross income is **above the threshold**, you must register for MTD, keep digital records from **day one**, file quarterly income/expenses updates, and still complete an annual Self Assessment return.
- If **below threshold**, you can volunteer for MTD, but not mandatory until you cross the income limits.
- Exemptions apply (e.g. those digitally excluded, very limited income types). HMRC guidance lays out specific criteria. ([assets.publishing.service.gov.uk](https://assets.publishing.service.gov.uk/media/6807527fe16c376084e7c751/making-tax-digital-for-income-tax-agent-toolkit.pdf?utm_source=openai))
## Practical Steps to Prepare
- Choose software that is MTD-compliant early. Many providers offer trial periods and support.
- Start keeping clean digital records now if you suspect your income approaches threshold—helps avoid last-minute scramble.
- Review your trailing year’s income: thresholds are calculated from most recently submitted tax return. If 2024/25 shows gross income above £50,000, you qualify for 2026 requirement. ([assets.publishing.service.gov.uk](https://assets.publishing.service.gov.uk/media/6807527fe16c376084e7c751/making-tax-digital-for-income-tax-agent-toolkit.pdf?utm_source=openai))
- Under the new penalty regime, missing a quarterly or annual update could lead to penalty points; accumulate too many and you may pay financial penalties. ([gov.uk](https://www.gov.uk/government/publications/making-tax-digital-programme-accounting-officer-assessment-updated/making-tax-digital-programme-accounting-officers-assessment-summary-updated?utm_source=openai))
## Example Scenario
*James* is a landlord renting two houses, earning £55,000 gross from those properties and some side self-employment. In tax year 2024-25 he earns £60,000 gross. As a result, from **April 2026** James must use MTD: purchase or use compliant software, maintain quarterly summaries, and still file his annual return. If he fails to submit a quarterly update, he gets a penalty point; after several, a financial penalty applies.
## Broader Impacts for Planning
- Cashflow planning becomes more important: prepare for nearer-term tax liabilities with quarterly updates.
- Advice & accounting costs may rise initially as software setup and workflow changes are needed.
- Good opportunity to streamline income/expense categories now to match software and HMRC classifications.
By understanding these changes now, sole traders and landlords can stay ahead, avoid penalties, and adopt efficient systems early rather than under pressure.