Compliance
How to Plan Now for MTD for Income Tax: A Guide for Sole Traders & Landlords
With Making Tax Digital (MTD) for Income Tax kicking in from April 2026 for those with over £50,000 income, sole traders and landlords need to get organised—this article guides you through actionable steps to comply and benefit.
By NomadicTax Research Team • 5-8 min read • March 4, 2026
## What is MTD for Income Tax and Who is Affected?
From 6 April 2026, UK sole traders and landlords whose gross income from self-employment plus property is **more than £50,000** during the 2024-25 tax year will be legally required to use Making Tax Digital (MTD) for Income Tax. This means keeping **digital records**, utilising **compatible software**, and submitting **quarterly updates** to HMRC. ([gov.uk](https://www.gov.uk/government/collections/making-tax-digital-for-income-tax-for-businesses-step-by-step?utm_source=openai))
## Key Dates & Thresholds You Need to Know
- **6 April 2026**: for those with over £50,000 income ([gov.uk](https://www.gov.uk/government/collections/making-tax-digital-for-income-tax-for-businesses-step-by-step?utm_source=openai))
- **6 April 2027**: threshold lowers to £30,000 ([gov.uk](https://www.gov.uk/government/statistics/making-tax-digital-for-income-tax-business-population-statistics/making-tax-digital-for-income-tax-business-population-statistics-commentary?utm_source=openai))
- **6 April 2028**: further lowered to £20,000 ([gov.uk](https://www.gov.uk/government/publications/agent-update-issue-133/issue-133-of-agent-update?utm_source=openai))
## First-Year Penalties & Transition Support
To support early compliance, individuals entering the scheme in **April 2026** will **not receive penalty points** for late submission of their **first four quarterly updates**. Penalties (financial or otherwise) typically begin after accumulating 4 penalty points. ([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))
## How to Prepare: Action Steps
- **Check your 2024–25 tax return** to calculate gross income from self-employment and property (before deducting expenses). If this exceeds £50,000, you’re in scope. ([gov.uk](https://www.gov.uk/guidance/get-ready-for-mtd-an-agent-toolkit/planning?utm_source=openai))
- **Choose compatible accounting software** that supports digital records, quarterly updates, and integrates with HMRC systems. It should allow you to send summaries and correct errors. ([gov.uk](https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/create-digital-records?utm_source=openai))
- **Set up good record-keeping systems now**, even if you have more time. Consistent categorisation and timely entries will reduce pressure later. Use simple vs full categorisation as allowed. ([gov.uk](https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/create-digital-records?utm_source=openai))
- **Check exemptions**: some may be exempt (temporarily or permanently) due to digital exclusion or other specific conditions. Use HMRC’s tools to see if you can delay or avoid MTD. ([gov.uk](https://www.gov.uk/guidance/check-if-youre-eligible-for-making-tax-digital-for-income-tax?utm_source=openai))
- **Speak to your accountant or agent**: they may already have protocols and favourite software packages. If using an agent, ensure they have access/permission. ([gov.uk](https://www.gov.uk/guidance/get-ready-for-mtd-an-agent-toolkit/planning?utm_source=openai))
## Potential Challenges & Benefits
**Challenges**
- Learning curve with new software and digital records.
- Quarterly updates increase administrative rhythm (more frequent reporting).
- Cost of software/licensing if already doing manual or low-tech accounting.
**Benefits**
- Fewer surprises at end-of-year—more consistent tracking of income and expenses.
- Better visibility of tax liability throughout the year.
- Potential peace of mind; fewer penalties if your data is up-to-date.
## Example Scenario
Sarah is a self-employed graphic designer; she also owns one rental property. Her gross income (before expenses) during 2024-25 from design is £45,000, and property gross income is £7,000, totalling **£52,000**. She must use MTD from 6 April 2026. She needs to pick software, begin recording digitally, and prepare for quarterly updates—her first Q1 update will be due on **7 August 2026**. But she won’t receive penalty points if that update is late, so long as it’s within her first 12 months in MTD. ([gov.uk](https://www.gov.uk/government/collections/making-tax-digital-for-income-tax-for-businesses-step-by-step?utm_source=openai))
## Summary
- If you have gross income over **£50,000** from self-employment + property in 2024–25, **April 2026** is your key date.
- Use MTD-compatible software, set up digital record keeping, and prepare for quarterly updates.
- Explore exemptions if applicable.
- Consult with a professional to make this transition smooth.
By taking action now, sole traders and landlords can avoid penalties, reduce year-end stress, and stay ahead of the UK's digital transformation of its tax system. The earliest deadlines may feel far off, but establishing strong systems now sets you up to succeed.