Compliance
Mastering Making Tax Digital: What Landlords & Sole Traders Must Do Now
Making Tax Digital (MTD) isn't just on the horizon—it’s already here for many sole traders and landlords. Learn what you need to do, practical steps to get compliant, and how to avoid penalties.
By NomadicTax Research Team • 5-8 min read • July 20, 2026
## What is Making Tax Digital for Income Tax (MTD IT)
Making Tax Digital for Income Tax is the UK government’s initiative to move self-employed individuals and landlords into a fully digital tax reporting system. If you're a sole trader or landlord, with **qualifying income** over £50,000 per year, then from **6 April 2026**, MTD IT applies to you. ([gov.uk](https://www.gov.uk/government/collections/making-tax-digital-for-income-tax?utm_source=openai))
Here are the thresholds by date:
- 2024–25 tax year: over **£50,000** → required from **6 April 2026** ([gov.uk](https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/before-you-use-this-guide?utm_source=openai))
- 2025–26 tax year: over **£30,000** → joining from **6 April 2027** ([gov.uk](https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/before-you-use-this-guide?utm_source=openai))
- 2026–27 tax year: over **£20,000** → joining from **6 April 2028** ([gov.uk](https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/before-you-use-this-guide?utm_source=openai))
## What You Must Do: Key Actions Now
1. **Check if you’re in scope**
Combine your turnover from self-employment and property before any deductions to see if you cross the relevant threshold. If you’re over, prepare now. ([gov.uk](https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/before-you-use-this-guide?utm_source=openai))
2. **Get software that’s MTD-compatible**
You’ll need software that can create/store corrections, send quarterly updates and submit year-end returns. Spreadsheets alone won’t be enough unless integrated with submission systems. ([gov.uk](https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/updates?utm_source=openai))
3. **Create digital records**
Keep all income and expense records digitally and update them as you go. If errors come up during the year, fix them “as soon as possible.” ([gov.uk](https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/updates?utm_source=openai))
4. **Plan quarterly updates**
Deadlines for quarterly updates (2026–27) are **7 August, 7 November, 7 February, 7 May**. While no penalties apply in the first year (2026–27) for missed quarterly updates, compliance is required. ([gov.uk](https://www.gov.uk/government/collections/finance-bill-2026-27-draft-legislation-and-technical-tax-documents?utm_source=openai))
5. **Submit tax return & payments on time**
Annual self-assessment returns remain due by **31 January** following the year end. Penalties for late payment and submission are changing—now becoming points-based. Accumulate 4 penalty points and you’ll face a financial penalty (from late submission or return filing) ([gov.uk](https://www.gov.uk/government/collections/finance-bill-2026-27-draft-legislation-and-technical-tax-documents?utm_source=openai))
## Penalties & “Soft Landing”
- First year (2026–27): No penalty points for missed quarterly update deadlines. Good news if you’re getting up to speed. ([gov.uk](https://www.gov.uk/government/collections/finance-bill-2026-27-draft-legislation-and-technical-tax-documents?utm_source=openai))
- After that: Each missed quarterly update, or late return, starts building penalty points; four points trigger a £200 penalty, with further fines on additional missed submissions. ([gov.uk](https://www.gov.uk/guidance/penalties-for-making-tax-digital-for-income-tax?utm_source=openai))
- Late payments still incur financial penalties; missing due dates triggers interest and escalating charges. ([gov.uk](https://www.gov.uk/guidance/penalties-for-making-tax-digital-for-income-tax?utm_source=openai))
## Practical Examples & Timeline
| Entrepreneur Type | Income Scenario | When must you comply | Key Actions Before Deadline |
|-------------------|------------------|------------------------|-------------------------------|
| Alice, a landlord with rental income £55,000/year | Only property income | April 6, 2026 onward | Secure MTD-compatible software, start keeping/digitising records quarterly |
| Bob, sole trader with £35,000 turnover self-employment | No property income | April 6, 2027 | Upgrade record-keeping, plan transition year |
| Cara, with £25,000 self-employment + £5,000 rental | Combined income £30,000 | April 6, 2027 requirement (as combined) | Combine income sources, monitor to avoid slipping over thresholds |
## Common Pitfalls & How to Avoid Them
- **Miscounting income sources**: self-employment + property income are combined. Don’t assume each source separately counts.
- **Using non-approved software or manual tools**: results in inability to submit; most software providers now list compatibility.
- **Skipping quarterly updates**: no penalty first year, but will cost you later.
- **Believing some groups are not in scope**: certain exemptions and deferred groups exist (topics like foreign entertainers, care income, etc.), so verify if one applies to you. ([gov.uk](https://www.gov.uk/government/publications/budget-2025-overview-of-tax-legislation-and-rates-ootlar/budget-2025-overview-of-tax-legislation-and-rates-ootlar?utm_source=openai))
## Action Plan Checklist
- [ ] Determine your qualifying income per last tax-year’s return
- [ ] Acquire MTD-compatible accounting software
- [ ] Digitally record all income & expenses (retroactively as needed)
- [ ] Familiarise with quarterly update deadlines
- [ ] Prepare to file your first return under MTD by 31 January following the year
**Bottom line:** Making Tax Digital is now law and already affects many sole traders and landlords. Getting organized now will help you avoid fines, stay compliant, and make the transition far less stressful.