Tax Planning
Making Tax Digital: Expanding Digital Reporting for Sole Traders & Landlords
UK is reducing the income threshold for Making Tax Digital, bringing more sole traders and landlords into the digital reporting radar. Know what changes from April 2026 to April 2028.
By NomadicTax Research Team • 5-8 min read • June 2, 2026
## What is Making Tax Digital (MTD) for Income Tax?
MTD is the UK government’s programme to digitise tax record-keeping and improve the accuracy and filing process. Under MTD for Income Tax (also known as MTD-ITSA), sole traders and landlords must use compatible software to maintain digital records and submit **quarterly updates** and a **final declaration** to HMRC. ([gov.uk](https://www.gov.uk/government/publications/update-notice-for-making-tax-digital-for-income-tax?utm_source=openai))
## New thresholds & timeline
The scheme is being introduced in **phases**, bringing more taxpayers into its scope:
- **From 6 April 2026**: those with qualifying income of **more than £50,000** from self-employment and property must participate. ([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))
- **From April 2027**: threshold lowers to **£30,000**. ([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))
- **From April 2028**: threshold will fall further to **£20,000**. ([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))
## Penalties: What happens if you miss deadlines
MTD introduces a **points-based penalty system** for late submission and late payment: each missed quarterly update or return deadline earns you a point, and reaching **4 points** triggers a **£200 fixed penalty** plus recurring penalties. ([gov.uk](https://www.gov.uk/guidance/penalties-for-making-tax-digital-for-income-tax?utm_source=openai))
For late payments, penalties are more proportional:
- During 2026-27 (first year), you have **30 calendar days** from the due date to pay in full or contact HMRC for a plan. ([gov.uk](https://www.gov.uk/guidance/penalties-for-making-tax-digital-for-income-tax?utm_source=openai))
- After 30 days, a percentage penalty kicks in; after 31 days, interest accrues until paid or for maximum period. ([gov.uk](https://www.gov.uk/guidance/penalties-for-making-tax-digital-for-income-tax?utm_source=openai))
## What this means in practice
### Example A: Landlord with £55,000 income (2025-26 tax year)
From April 2026, this person must use MTD-compatible software, send 4 quarterly updates (due 7 August, 7 November, 7 February, 7 May), then submit a final declaration by 31 January 2028. If any quarterly update is late, they get one penalty point per missed deadline. After 4 points, a £200 fine – plus more if further deadlines missed. ([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))
### Example B: Sole trader with £25,000
Not yet mandated for **April 2026**, but as of **April 2028**, required under the £20,000 threshold. Before then, compliance remains voluntary if income thresholds aren’t met. ([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))
## Actionable tips to prepare
- Select and test MTD-compatible accounting software now. If you expect to cross the threshold, early adoption helps avoid steep learning curves.
- Keep clean, detailed digital records of income and expenses. Disparate spreadsheets or paper records may not satisfy HMRC-compatible requirements.
- Understand your penalty risks—and that missing one deadline in year one won’t immediately cost you financially, but slipping repeatedly will.
MTD for Income Tax is one of the biggest changes to self-assessment in decades. Getting ahead by a year or two reduces risk and anxiety—and ensures you can focus on your business, not compliance.