Compliance
MTD for Income Tax: Digital Reporting for Self-Employed & Landlords—Compliance Guide
HMRC’s Making Tax Digital (MTD) rules are now live for higher-earning sole traders and landlords—here’s what’s required to stay compliant and avoid penalties.
By NomadicTax Research Team • 5-8 min read • July 22, 2026
## What’s the New Requirement?
Since **6 April 2026**, sole traders and landlords with **qualifying income over £50,000** from business or property must use **Making Tax Digital for Income Tax (MTD-ITSA)**. That means keeping **digital records**, using **compatible software**, and submitting **quarterly updates** to HMRC. ([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))|
Thresholds will drop: from **April 2027**, income over **£30,000** triggers the requirement; from **April 2028**, it’s £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))|
## Who Is Exempt or Delayed?
- Individuals such as **ministers of religion**, **Lloyd’s underwriters**, and **recipients of Blind Person’s Allowance** are **deferred until at least April 2029**. Others like non-UK resident entertainers with no other qualifying income are permanently exempt. ([gov.uk](https://www.gov.uk/government/publications/making-tax-digital-for-income-tax-and-penalty-reform?utm_source=openai))|
## Key Compliance Steps by Individual
1. Choose MTD-compatible **software** suited to your business.
2. Sign up for **quarterly updates**—report income and expenses every three months.
3. Prepare for **end-of-year filing** using that same software.
4. Ensure **accuracy** and full record keeping: digital, timestamped, verifiable.
5. Know deadlines to avoid **late submission penalties** and **penalty-points system** under MTD. ([gov.uk](https://www.gov.uk/government/publications/making-tax-digital-for-income-tax-and-penalty-reform?utm_source=openai))|
## Examples
- Alice runs a photography business, earns £60,000 in 2026. She needs to keep digital records now and send quarterly returns, starting Q1 after April 2026.
- Bob owns rental properties, earning net rental income £55,000. He similarly must comply now. Barbara, at £35,000, waits until April 2027.
## Common Pitfalls & How to Avoid Them
- **Using incompatible software**: ensure HMRC recognizes your tools.
- **Failing to keep digital records** with proper categorisation.
- **Losing track of deadlines**: quarterly update dates vs final self assessment returns.
- **Overlooking exemptions**: check if you are permanently or temporarily exempt.
## What Happens If You Don’t Comply
- Penalties under MTD: financial fines, penalty points leading to further action. ([gov.uk](https://www.gov.uk/government/publications/making-tax-digital-for-income-tax-and-penalty-reform?utm_source=openai))|
- HMRC can adjust or cancel penalty points in some circumstances (e.g. first year, reasonable excuse). ([gov.uk](https://www.gov.uk/government/publications/making-tax-digital-for-income-tax-and-penalty-reform?utm_source=openai))|
## Practical Tips to Stay Ahead
- Start early: even before mandatory threshold hits **£30,000**, get familiar with quarterly reporting.
- Maintain accurate digital records all year rather than catching up at year end.
- Use services of qualified agents/advisers—note that **tax advisers must register** under the new MMTAR rules. ([gov.uk](https://www.gov.uk/government/news/tax-advisers-check-if-you-need-to-register-under-new-rules?utm_source=openai))|
- If you think you're close to threshold, monitor income carefully year over year.
## Summary
MTD-ITSA is transforming how self-employed people and landlords report their income: digital, frequent, and software-driven. Staying ahead by setting up systems, understanding duties, and following deadlines will help avoid penalties—and make tax time much easier.