Compliance
Navigating Making Tax Digital for Income Tax: What UK Businesses & Landlords Need to Know
From April 2026, UK unincorporated businesses and landlords above certain income thresholds must report income quarterly via compatible software. Here’s how to prepare and stay compliant.
By NomadicTax Research Team • 5-8 min read • August 24, 2026
## What is Making Tax Digital for Income Tax (ITSA)?
In April 2026, HMRC introduced **The Income Tax (Digital Obligations) Regulations 2026**, mandating that relevant persons—sole traders and landlords—keep digital records and submit **quarterly updates** of their income and expenses, along with an **annual digital Self Assessment return**.([legislation.gov.uk](https://www.legislation.gov.uk/uksi/2026/336/pdfs/uksiem_20260336_en_001.pdf?utm_source=openai))
### Who’s in scope — and when it applies:
- From **6 April 2026**: those with combined rental and self-employment income over **£50,000** must comply.([gov.uk](https://www.gov.uk/government/publications/update-notice-for-making-tax-digital-for-income-tax?utm_source=openai))
- From **6 April 2027**: threshold lowers to **£30,000**.
- From **6 April 2028**: threshold lowers further to **£20,000**.([gov.uk](https://www.gov.uk/government/publications/update-notice-for-making-tax-digital-for-income-tax?utm_source=openai))
### Key obligations:
- Use HMRC-approved **software** to maintain **digital records** of income and outgoings.
- Submit **quarterly updates** using compatible software, generally aligned with calendar quarters.([legislation.gov.uk](https://www.legislation.gov.uk/uksi/2026/336/pdfs/uksiem_20260336_en_001.pdf?utm_source=openai))
- File an **annual digital return** even after adopting quarterly updates.
## Practical examples & scenarios
| Scenario | Income source | Reporting requirement as of April 2026 |
|---|---|---|
| Chiara rents out a property for £12,000/year plus £45,000 self-employed income | Rental + self-employed | Total £57,000 ✅ — in scope; needs digital records and quarterly updates
| Owen earns £40,000 from freelancing only | Self-employed only | Under £50,000 in 2025-26 → out of scope until 2027
## How to prepare now:
- **Check your income** for 2024-25 (rent + business profit) to see whether you cross the £50,000 mark.
- **Choose software** compatible with MTD rules. Many accounting tools now include support.
- **Register** with HMRC for MTD for IT if required. Missed registration deadlines may lead to penalties.
- **Track quarters**: know when each quarter ends (typically 7 August for Q1, etc.), so you have time to collect and report required data.
## Consequences of non-compliance:
- Penalty points accrue for late quarterly submissions. After **4 points**, a **fixed penalty** (approximately £200) may apply. However, during the first 12 months after coming into scope, HMRC will **not issue penalty points** for missed quarterly updates.([gov.uk](https://www.gov.uk/government/news/act-now-864000-sole-traders-and-landlords-face-new-tax-rules-in-two-months?utm_source=openai))
## Tips for smoother adoption:
- Maintain a **single income + expense record system** to avoid duplication.
- **Automate** wherever possible: recurring expenses, instant upload to software.
- Plan cash flow for frequent reporting and possibly more frequent tax liabilities.
- Leverage HMRC’s guidance, webinars, or agent support where available.
**Bottom line**: If your combined income from rental and self-employment pushes past £50,000 in 2025-26, you can’t afford to ignore ITSA’s digital shift. Start collecting digital records, get the right software, and set quarterly deadlines to avoid getting caught out.