Compliance
Navigating Making Tax Digital: Compliance Advice for Self-Employed and Landlords
With new rules rolling out for digital reporting and record-keeping under Making Tax Digital (MTD) for Income Tax, self-employed individuals and property owners must update practices to stay compliant.
By NomadicTax Research Team • 5-8 min read • February 24, 2026
## What Is MTD for Income Tax and What’s Changing
Making Tax Digital (MTD) for Income Tax requires **unincorporated business owners and landlords** with gross income above certain thresholds to:
- keep **digital records**,
- use **compatible software**,
- submit **quarterly updates** to HMRC. ([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))
Key thresholds:
- From **6 April 2026**, those with income over **£50,000** from self-employment or property must comply. ([gov.uk](https://www.gov.uk/government/publications/digital-record-keeping-notice-for-making-tax-digital-for-income-tax?utm_source=openai))
- From **April 2027**, the threshold lowers to **£30,000**. Eventually, a further threshold of **£20,000** will apply (date to be confirmed). ([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))
## Practical Steps to Ensure Compliance
1. **Assess your income sources**: Include both self-employment and property income. If combined gross income above threshold, you’re in scope. Include profits before deductions.
2. **Get digital record-keeping systems ready**: Must track categories of expenses and income; record finance costs such as mortgage interest separately for property income. Use software tools that are listed as “compatible” by HMRC. ([gov.uk](https://www.gov.uk/government/publications/digital-record-keeping-notice-for-making-tax-digital-for-income-tax/making-tax-digital-for-income-tax-digital-record-keeping-notice?utm_source=openai))
3. **Quarterly updates**: Plan for reporting every quarter, not once a year. Need to send period summary data (income, expenses, totals) via MTD-compatible software.
4. **Stay aware of exemptions**: Some classes, like ministers of religion, certain entertainers or people permanently overseas, are exempt or deferred until at least **April 2029**. ([gov.uk](https://www.gov.uk/government/publications/making-tax-digital-for-income-tax-and-penalty-reform?utm_source=openai))
5. **Prepare ahead for penalty regime**: HMRC is refining penalties for late digital submissions and returns. Build buffer into schedules and alert systems. ([gov.uk](https://www.gov.uk/government/publications/making-tax-digital-for-income-tax-and-penalty-reform?utm_source=openai))
## Example
Jane is a landlord with incomes from two properties and also freelances as a web designer. Her gross income from self-employment and property together totals £55,000 in financial year 2025-26. She must from April 2026:
- use digital record-keeping software,
- send quarterly updates,
- file year-end submission via compatible software.
If her records are missing separated finance cost entries for mortgages or mixed income categories, she may be penalised.
## Benefits and Challenges
**Benefits:**
- smoother cashflow management as updates spread over year,
- easier year-end filing,
- clarity and audit resilience.
**Challenges:**
- software costs & learning curve,
- accurate categorisation and records (especially for mixed incomes),
- risk of missing deadlines and facing penalties.
## Checklist to Stay Compliant
- Confirm whether your income sources and amounts bring you into MTD scope.
- Choose HMRC-recognised software before April 2026. Test run for dummy data.
- Set reminders for quarterly update filing dates.
- Maintain separate records for income sources, especially where property, self-employment overlap.
- Track finance costs separately; ensure joint property income correct categorisations.
Being proactive about MTD for Income Tax compliance now ensures you avoid penalties and stress. For self-employed individuals and landlords, it’s about updating processes, sharpening record keeping, and choosing the appropriate software.