Tax Planning

MTD for Income Tax: What Sole Traders & Landlords Must Do Now

From April 2026 the UK is rolling out Making Tax Digital for Income Tax for select sole traders and landlords—this article guides you on what’s changing and how to stay compliant.

By NomadicTax Research Team • 5-8 min read • May 18, 2026

## Overview of Making Tax Digital for Income Tax (MTD ITSA) Starting **6 April 2026**, sole traders and landlords with combined gross income over **£50,000** from self-employment and property will need to adopt the new digital reporting rules.([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)) Phase-ins follow: from April 2027 the threshold drops to **£30,000**, then to **£20,000** in April 2028.([gov.uk](https://www.gov.uk/guidance/get-ready-for-mtd-an-agent-toolkit/understanding-making-tax-digital-for-income-tax?utm_source=openai)) ## What the new requirements are - Use **compatible digital software** to record business and property income & expenses.([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)) - Send **quarterly updates** of income and expenses to HMRC instead of waiting until year-end.([gov.uk](https://www.gov.uk/guidance/get-ready-for-mtd-an-agent-toolkit/understanding-making-tax-digital-for-income-tax?utm_source=openai)) - File Self Assessment returns by **31 January** following the tax year, as usual, but now informed by quarterly data already lodged.([gov.uk](https://www.gov.uk/guidance/get-ready-for-mtd-an-agent-toolkit/understanding-making-tax-digital-for-income-tax?utm_source=openai)) ## Penalties and easing period - For the first tax year of MTD (2026-27), **penalty points for late quarterly updates will not be enforced**—providing leeway during transition.([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)) - After that, late or missed quarterly updates and full returns will accrue penalty points; **once 4 points are reached**, a £200 penalty will apply.([gov.uk](https://www.gov.uk/guidance/get-ready-for-mtd-an-agent-toolkit/understanding-making-tax-digital-for-income-tax?utm_source=openai)) ## How to prepare now - **Choose and test software** that is MTD compatible—many providers offer free or low-cost options. - Organize your record-keeping—digitize receipts, invoices, and expenses. - Budget for adjustments in your cash flow: reduced surprise liabilities due to quarterly updates. - Talk to your accountant or adviser to ensure they understand what the changes mean for you. ## Example case: Landlord with rental income + self-employment - Jane earns £45,000 from a self-employed business and £8,000 net from a rental property in 2024-25. **Gross income** from both exceeds £50,000, so she must join MTD ITSA from April 2026. - She uses digital software to log expenses, sends **4 quarterly updates** across 2026-27 (Aug 2026, Nov 2026, Feb 2027, May 2027), then files full Self Assessment by 31 Jan 2028. - If Jane misses one quarterly update, she won’t be penalised in the first year; repeat misses beyond 4 points may attract the £200 penalty. ## Advantages and hidden risks **Pros:** - Better visibility of income and expenses throughout year—easier planning. - Potential reduction in late-filing stress. - Less chance of missing deductions or allowances. **Risks to avoid:** - Poor bookkeeping leads to incorrect quarterly updates. - Software not configured correctly may misclassify expenses. - Ignoring cash-flow implications of quarterly estimates. ## Key takeaways - If you’re over £50,000 gross from self-employment + property in 2024-25, get ready now: choose software, organise digital records. - Take advantage of the penalty-free transition year. - Monitor upcoming thresholds (April 2027 & 2028) if your income hovers around them. - Non-resident income and cross-border landlords must also watch changes to tax credits (covered in our next article).