Compliance
Making Tax Digital (MTD) for Income Tax: What Sole Traders & Landlords Need to Know
From April 6, 2026, new digital reporting requirements affect sole traders and landlords with qualifying income over £50,000 — here’s how to plan and ensure smooth compliance.
By NomadicTax Research Team • 5-8 min read • April 17, 2026
## What is Making Tax Digital for Income Tax (MTD ITSA)?
Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is a UK government initiative that requires certain individuals — sole traders and landlords — to keep digital records and submit quarterly updates of income and expenses to HMRC using compatible software. ([gov.uk](https://www.gov.uk/government/news/one-year-until-making-tax-digital-for-income-tax-launches?utm_source=openai))
## Who’s in Scope & When It Starts
| Qualifying Income | From | Requirement |
|-------------------|------|-------------|
| Self-employed / property income over **£50,000** | 6 April 2026 | Must register and comply with MTD ITSA ([gov.uk](https://www.gov.uk/government/news/one-year-until-making-tax-digital-for-income-tax-launches?utm_source=openai)) |
| £30,000+ | 6 April 2027 | Will be included under phased extension ([gov.uk](https://www.gov.uk/government/news/one-year-until-making-tax-digital-for-income-tax-launches?utm_source=openai)) |
| £20,000+ | 6 April 2028 | Final stage of threshold reduction ([gov.uk](https://www.gov.uk/government/news/one-year-until-making-tax-digital-for-income-tax-launches?utm_source=openai)) |
Some individuals may be exempt (e.g. digitally excluded, certain property income arrangements) — review HMRC guidance to determine whether you’re exempt. ([gov.uk](https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/updates?utm_source=openai))
## What You’ll Need to Do
- **Digital record-keeping:** All income and expense records must be stored digitally using HMRC-recognised software. Manual or paper-only systems won’t suffice. ([gov.uk](https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/updates?utm_source=openai))
- **Quarterly updates:** Every quarter, submit an update reporting business or property income and allowable expenses to HMRC. These are in addition to the annual Self Assessment return. ([gov.uk](https://www.gov.uk/government/news/one-year-until-making-tax-digital-for-income-tax-launches?utm_source=openai))
- **Compatible software:** Choose software that connects to HMRC for quarterly updates and full tax return submissions. If you have multiple income sources or partnership profits, ensure software supports all relevant reporting needs. ([gov.uk](https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/updates?utm_source=openai))
- **Sign up in advance:** If you’re over the £50,000 threshold, you must be registered by 6 April 2026. Voluntary signup is available earlier to help ease transition. ([gov.uk](https://www.gov.uk/guidance/sign-up-your-business-for-making-tax-digital-for-income-tax?utm_source=openai))
## Practical Example
*Sarah* is a landlord whose rental income (after allowable expenses) totals £55,000 for 2025–26. She has been self-employed in a side business earning £10,000. Combined annual *qualifying income* from property plus self-employment exceeds £50,000. From 6 April 2026, **Sarah must:**
1. Use digital software to manage both rental and self-employment income and expenses.
2. Submit quarterly updates for both income streams.
3. Still submit her annual Self Assessment return as usual, but reporting through MTD-compatible software.
## Tips to Prepare
- Review your 2024–25 tax return to see if your self-employment + property income exceeded £50,000. If close, plan as if you’re in scope.
- Research and test digital accounting software now to understand how to categorise income/expenses properly.
- Keep clear records for partnership income, rental distributions, and jointly owned properties — especially where profits are shared.
- Budget for possible costs: software subscriptions, training, and possibly accountant/legal advice.
## Risks of Non-Compliance
- HMRC imposes penalty points for late or missing quarterly updates after April 2026. While the first year won’t have late-update penalties for new users, penalties for late returns or late payments still apply. ([gov.uk](https://www.gov.uk/guidance/sign-up-your-business-for-making-tax-digital-for-income-tax?utm_source=openai))
- Errors in categorising income (self-employment vs. property vs. savings/dividends) can lead to wrong tax rates applied, which may result in underpayment, fines, or the need for adjustments.
## Summary
**MTD ITSA represents one of the most significant changes to how sole traders and landlords report tax in decades.** From 6 April 2026, those over £50,000 qualifying income must comply. Thresholds will gradually drop, affecting increasing numbers in subsequent years. Early preparation — understanding thresholds, getting the right software, and keeping excellent records — will make the transition smoother and avoid unwanted surprises.