Compliance
Making Tax Digital for Income Tax: What Sole Traders & Landlords Need to Change by April 2026
If your annual self-employment or rental income exceeds £50,000, you must shift to digital reporting and quarterly updates from 6 April 2026—this guide walks you through the how, when and why.
By NomadicTax Research Team • 5-8 min read • February 19, 2026
## What’s Changing & Who's Affected
From **6 April 2026**, sole traders and landlords whose **qualifying income** (self-employment plus rental, excluding certain allowances) **exceeds £50,000 in the previous tax year (2024-25)** will be required to use **Making Tax Digital for Income Tax (MTD for ITSA)**. That means maintaining digital records, using compatible software and submitting quarterly updates of income and expenses. ([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))
There are phased reductions too:
- Income over **£30,000**: join from **April 2027**. ([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))
- Income over **£20,000**: onward from **April 2028**. ([gov.uk](https://www.gov.uk/government/publications/modernising-the-tax-system-through-making-tax-digital/technical-note-modernising-the-tax-system-through-making-tax-digital?utm_source=openai))
## Key Requirements & Important Dates
| What | When it starts | Deadline or impact |
|------|----------------|---------------------|
|Digital record keeping & quarterly updates|From 6 April 2026|First quarterly report due **7 August 2026**. ([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))|
|File annual Self Assessment return|After end of tax year (5 April 2027 for year starting Apr-2026)|**31 January 2028** for tax year 2026-27. ([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))|
|Penalty relief for early slip-ups|First 12 months of MTD for ITSA|No penalty points for late updates during the 12-month grace period. ([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))|
## What Counts as “Qualifying Income”?
Qualifying income includes:
- Self-employment income (after expenses)
- Property income (both UK and foreign properties combined separately) ([gov.uk](https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/create-digital-records?utm_source=openai))
And excludes if:
- Income was below personal allowances and property or trading income allowances in prior returns, under certain thresholds. ([gov.uk](https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/create-digital-records?utm_source=openai))
## Benefits & Challenges
**Pros:**
- Fewer surprises at tax return time — each quarter update gives clearer cash flow forecasts.
- Reduced errors and missing receipts — digital systems force better record keeping.
- Ease of planning — you can adjust deductions or revenue recognition during the year rather than at year-end.
**Cons:**
- Need to invest in software or accounting tools if you haven’t already.
- A learning curve for switching from annual to quarterly recordkeeping.
- Potential need to engage an accountant or agent experienced with digital filing if queries or mishaps occur.
## Practical Actions You Should Take Now
1. **Choose software early**: Select MTD-compatible software now so you have time to test it ahead of first quarterly deadline. Many free or lower-cost versions are available. ([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))
2. **Gather historic records**: Ensure your books, rent receipts, expenses and self-employment income history for 2024-25 are in order — many of those figures determine if you’re brought into scope.
3. **Check if you’re exempt**: Digital barriers, physical disability, or low income may make you eligible for exemptions. Apply to HMRC in time. ([gov.uk](https://www.gov.uk/guidance/check-if-youre-eligible-for-making-tax-digital-for-income-tax?utm_source=openai))
4. **Agent/Advisor**: If you use an accounting agent, make sure they know about these changes and are ready to handle quarterly updates.
5. **Cash Flow Forecasting**: Since your tax liability may be spread or better predicted, plan your cash flow quarterly so payments don’t pile up unexpectedly.
## Example Scenario
Bob is a landlord with gross rental income of £60,000 per annum. After deductions, his qualifying income is £55,000 for tax year 2024-25. Therefore, from **6 April 2026**, Bob must:
- Keep digital records of all rental income and allowable expenses.
- Submit four quarterly updates (due 7 August 2026, 7 November, 7 February 2027, and 7 May 2027) of summary income & expenses.
- File Self-Assessment tax return by **31 January 2027**, for the 2025-26 year as usual. But from tax year 2026-27, the return will be partially pre-filled by quarterly updates.
- Not get penalty points for occasional quarter-late updates during the first 12-months grace period.
## Long-Term Considerations
- When thresholds reduce in April 2027 and 2028, more sole traders and landlords will be brought in — plan ahead for lower-income years.
- Expand digital skills or train staff; early familiarity pays off.
- Monitor HMRC guidance updates — design and software approvals may shift.
## Final Word
MTD for Income Tax isn’t just another HMRC program – it represents a structural shift in how tax is reported and paid. If you’re already over £50,000 qualifying income, this is urgent. If not yet reached, these changes are coming and earlier preparation will reduce pain points later.