Compliance
Mastering Making Tax Digital (MTD) for Sole Traders & Landlords in 2026-28
With MTD for Income Tax now in effect for many, sole traders and landlords need to get digital record-keeping right—and avoid new penalties.
By NomadicTax Research Team • 5-8 min read • August 31, 2026
## What is MTD for Income Tax and who it affects
From **6 April 2026**, if you’re a sole trader or landlord and your **qualifying income** from self-employment and UK property (before expenses) exceeded **£50,000** in the 2024-25 tax year, you must use Making Tax Digital (MTD) for Income Tax. ([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)) If your income is over **£30,000** in 2025-26, or over **£20,000** in 2026-27, those thresholds will require MTD from **6 April 2027** and **6 April 2028**, respectively. ([gov.uk](https://www.gov.uk/guidance/find-out-if-and-when-you-need-to-use-making-tax-digital-for-income-tax?utm_source=openai))
## Key requirements under MTD for Income Tax
You’ll need to:
- keep **digital records** of your self-employment and property income and expenses using software compatible with HMRC’s MTD requirements. ([gov.uk](https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/before-you-use-this-guide?utm_source=openai))
- send **quarterly updates** summarising those records (not full tax returns). Deadlines are typically every 3 months (for example, for tax year 2026-27 the first deadline was 7 August 2026). ([gov.uk](https://www.gov.uk/guidance/get-ready-for-mtd-an-agent-toolkit/understanding-making-tax-digital-for-income-tax?utm_source=openai))
- submit your annual Self Assessment tax return using MTD-compatible software by **31 January** following the end of the tax year. For tax year 2025-26, that deadline is **31 January 2027**. ([gov.uk](https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/submit-your-tax-return?utm_source=openai))
## Penalties and transitional relief
For the 2026-27 tax year, HMRC will **not issue penalty points** for late quarterly updates, but points will apply for late annual returns. ([gov.uk](https://www.gov.uk/government/news/436000-sole-traders-and-landlords-make-their-tax-digital?utm_source=openai)) From 2027-28 onward, penalties will apply for missing either quarterly deadlines or the return deadline. ([gov.uk](https://www.gov.uk/guidance/get-ready-for-mtd-an-agent-toolkit/understanding-making-tax-digital-for-income-tax?utm_source=openai))
## Practical examples & what you should do now
| Scenario | Action required now |
|---|---|
| Sole trader, gross income £60,000 in 2024-25 | Already required to use MTD from April 2026. Ensure software in place and quarterly record-keeping starts. |
| Landlord whose gross rent from property was £40,000 in 2024-25 | Also required from April 2026. Register, get software and start updates. |
| Income drops below threshold in future years | If income in the previous tax year falls below threshold, you may evade mandation—but still must keep records until notified. |
## Agent & compliance tips
- Agents should check which clients are required to use MTD and help them sign up well before deadlines. ([gov.uk](https://www.gov.uk/government/collections/making-tax-digital-for-income-tax-for-sole-traders-and-landlords-step-by-step?utm_source=openai))
- Choose software that handles digital records, quarterly updates and annual returns—and supports integrating other income sources (dividends, pensions, etc.) since all income must go into annual return. ([gov.uk](https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/before-you-use-this-guide?utm_source=openai))
- Be alert to transitional changes—guidance was updated in July-August 2026 regarding record-keeping start dates, income source additions/cessations, penalty points, etc. ([gov.uk](https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/updates?utm_source=openai))
- Check whether you are exempt (e.g. due to digital exclusion) via GOV.UK and keep supporting evidence. ([gov.uk](https://www.gov.uk/government/collections/making-tax-digital-for-income-tax-for-sole-traders-and-landlords-step-by-step?utm_source=openai))
## Why this matters
MTD for Income Tax is the biggest change in Self Assessment since its inception. It is intended to:
- reduce errors and unexpected tax bills by enabling real-time visibility of income and expenses,
- spread the compliance burden over the year, rather than leaving everything to January,
- encourage better digital adoption for tax advisers, software providers and taxpayers. ([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))
**Actionable steps you should take**:
1. determine your qualifying income for the last tax year to see if you're in scope;
2. get or verify software that is MTD-compatible (look at HMRC’s approved list);
3. familiarise yourself with quarterly update deadlines and plan cash flow accordingly;
4. consult a tax adviser if your income, business structure or property holdings are complex.
---