Tax Planning

Making Tax Digital (MTD) for Income Tax: What Landlords & Sole Traders Must Do

From April 2026 all landlords and sole traders with over £50,000 property/self-employment income must use digital record-keeping & quarterly reporting — here's a breakdown.

By NomadicTax Research Team • 5-8 min read • May 28, 2026

## What is MTD for Income Tax (ITSA)? Making Tax Digital for Income Tax Self Assessment (ITSA) is a major reform so that sole traders and landlords keep digital records, use software recognised by HMRC, and submit **quarterly updates** of income & expenses. It replaces much of the annual-only self-assessment process for those in scope. ([gov.uk](https://www.gov.uk/government/publications/extension-of-making-tax-digital-for-income-tax-self-assessment-to-sole-traders-and-landlords/making-tax-digital-for-income-tax-self-assessment-for-sole-traders-and-landlords?utm_source=openai)) ## Who’s in Scope and When - Beginning **6 April 2026**, sole traders & landlords with **qualifying income over £50,000** will be required to comply. ([gov.uk](https://www.gov.uk/government/publications/extension-of-making-tax-digital-for-income-tax-self-assessment-to-sole-traders-and-landlords/making-tax-digital-for-income-tax-self-assessment-for-sole-traders-and-landlords?utm_source=openai)) - Then, from **April 2027**, those with income over £30,000 are included. From **April 2028**, threshold drops to £20,000. ([gov.uk](https://www.gov.uk/government/publications/extension-of-making-tax-digital-for-income-tax-self-assessment-to-sole-traders-and-landlords/making-tax-digital-for-income-tax-self-assessment-for-sole-traders-and-landlords?utm_source=openai)) ## Key Requirements and Actions 1. Use **recognised software**: Digital record-keeping via HMRC-compatible tools is mandatory. Bridging tools or full accounting software may work. ([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. Submit **quarterly updates**: Income & expense updates every quarter; plus an end-of-year final declaration. ([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)) 3. First annual tax return under new regime is due by **31 January 2028**, covering 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)) 4. **Penalty-free transition period**: For those joining in April 2026, no penalty points for late quarterly updates during first 12 months. ([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)) ## Practical Examples - A landlord earning **£60,000** rental income will need to start using software, keeping digital records, and sending in income/expense updates every 3 months starting April 2026. - A sole trader with **£35,000** profit from self-employment will not be required until April 2027, giving time to prepare. ## Tips to Comply Smoothly - Start using compatible software now, even if not required yet. Migration is easier in stages. - Separate personal and business bank accounts to simplify records. - Keep thorough records: receipts, invoices, bank statements. Software that auto‐categorizes helps. - Use HMRC resources: guidance, webinars, scheme documents. - Apply for exemptions if eligible (e.g. limited internet, disability) but do so ahead of deadlines. ## Benefits & Risks **Benefits**: Improved accuracy, smoother tax filings, less rush during self-assessment, fewer errors. **Risks**: Admin burden if not prepared, software costs, potential penalties if late after transition. ## Summary MTD for ITSA marks a shift from annual filings toward **quarterly truthful financial snapshots** for many sole traders and landlords. If you meet the income thresholds, start adopting digital tools, organise your finances, and gear up for this change ahead of each milestone date. It’s not just about compliance—it’s about future-proofing your business.