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)|
Thresholds will drop: from April 2027, income over £30,000 triggers the requirement; from April 2028, it’s £20,000. (gov.uk)|
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)|
Key Compliance Steps by Individual
- Choose MTD-compatible software suited to your business.
- Sign up for quarterly updates—report income and expenses every three months.
- Prepare for end-of-year filing using that same software.
- Ensure accuracy and full record keeping: digital, timestamped, verifiable.
- Know deadlines to avoid late submission penalties and penalty-points system under MTD. (gov.uk)|
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)|
- HMRC can adjust or cancel penalty points in some circumstances (e.g. first year, reasonable excuse). (gov.uk)|
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)|
- 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.