What is Making Tax Digital (MTD) for Income Tax Self Assessment?
Starting 6 April 2026, businesses, self-employed individuals and landlords whose qualifying income (from trading and property) exceeds £50,000 will be required to operate under MTD rules. Those whose income exceeds £30,000 will have to join from 6 April 2027.(gov.uk)
Under MTD, affected taxpayers will need to:
- keep records digitally using compatible software;
- send digital quarterly updates to HM Revenue & Customs (HMRC);
- submit the annual Income Tax Self-Assessment return via software.(gov.uk)
Why this matters now
- Many landlords/sole traders under the old Self Assessment model will need to upgrade their systems, software and processes before the deadline.\
- Failure to comply can lead to penalties, especially after transitional grace periods.\
- Digital accounting can open up better tax planning opportunities and real-time financial visibility.
Action steps you should take
| Step | What you should do | Timeline / Example |
|---|---|---|
| 1 | Determine if your qualifying trading + property income exceeds £50,000 (for 2025-26) | Based on your last tax return; if it exceeds, you’re in scope from 6 April 2026. |
| 2 | Choose software that’s HMRC-compatible | Use the list on gov.uk to check approved software. |
| 3 | Digitize your records — invoices, expenses, property income, etc. | Early 2026 gives you buffer. |
| 4 | Plan quarterly updates: which dates, what to report, who handles it | For many, these will be in August, November, February and May. |
| 5 | Seek professional advice if you have complex situations (e.g. non-UK income, trusts) | Ensures all corners of your tax obligations are covered. |
Example scenario
Sarah is a landlord whose gross property rental income is £30,000 and runs a side business earning £25,000 a year. Her qualifying income (property + trading) is thus £55,000. From 6 April 2026, Sarah must use MTD: maintain digital records, file quarterly updates, and submit her annual Self Assessment via software. If she misses the annual-return deadline through the previous paper/portal route, HMRC may refuse her annual return unless she is compliant.
Common pitfalls to avoid
- Relying on spreadsheets that are not “compatible software” under HMRC’s rules.\
- Waiting until close to the deadline to find or train with software—errors can be costly.\
- Overlooking property income that needs to be included in “qualifying income.”\
- Assuming exemptions—there are defined thresholds, not blanket exclusions.
Conclusion
The shift toward Making Tax Digital for sole traders and landlords with over £50,000 qualifying income is a major compliance milestone. Acting early—selecting the right software, digitizing your records, understanding your reporting timeline—can make the transition smooth. For those nearing the thresholds, keeping a close eye on income projections is crucial. With proper planning, MTD can deliver efficiency and clarity in your tax affairs.