Compliance
Navigating Making Tax Digital (MTD): What Sole Traders & Landlords Need to Know Now
With the first quarterly update deadline shifting UK tax into a new digital era, sole traders and landlords face actionable steps to stay compliant under Making Tax Digital for Income Tax.
By NomadicTax Research Team • 5-8 min read • August 10, 2026
## What is Making Tax Digital (MTD) for Income Tax?
Introduced in April 2026, **MTD for Income Tax** requires sole traders and landlords with more than £50,000 gross income from self-employment or property to:
- **Keep digital records** using MTD-compatible software.
- **Submit light-touch quarterly updates** of income and expenses.
- Continue submitting a traditional Self Assessment tax return by 31 January for the preceding year. ([gov.uk](https://www.gov.uk/government/news/deadline-approaches-for-first-making-tax-digital-quarterly-update?utm_source=openai))
## Key Deadlines
- First quarterly update period runs **from 6 April to 5 July 2026**, with a deadline of **7 August 2026**. ([gov.uk](https://www.gov.uk/government/news/deadline-approaches-for-first-making-tax-digital-quarterly-update?utm_source=openai))
- Penalties (points system) for missed updates start after the first year; in the first year, HMRC is **not issuing penalty points** for late quarterly updates. ([gov.uk](https://www.gov.uk/government/news/deadline-approaches-for-first-making-tax-digital-quarterly-update?utm_source=openai))
## What You Need to Do Now
- **Sign up** for MTD if your income exceeds £50,000 in self-employment or rental property. Actions involve getting the software, registering with HMRC’s digital services. ([gov.uk](https://www.gov.uk/government/news/deadline-approaches-for-first-making-tax-digital-quarterly-update?utm_source=openai))
- Choose **compatible software** that can handle income & expenses recording, generate quarterly reports, embrace digital record-keeping practices. HMRC publishes lists of recognised software. ([gov.uk](https://www.gov.uk/government/news/deadline-approaches-for-first-making-tax-digital-quarterly-update?utm_source=openai))
- **Plan ahead** your quarterly submissions to avoid errors and ensure data is ready: track income and expenses continuously. Errors should be corrected “as soon as possible” in digital records. ([gov.uk](https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/updates?utm_source=openai))
## Common Challenges & How to Work Around Them
| Challenge | Actionable Insight |
|---|---|
| Not having digital records or software yet | Use HMRC guidance and grant-funded help where available; test software and prepare first update early. |
| Complexity of categorising income & expenses | Consult an accountant or use software features categorising receipts and matching expenses. |
| Misunderstanding update vs. tax return obligations | Updates **do not replace** your Self Assessment; still due by 31 January. |
| Missing a quarterly deadline | In first year, no penalty points; but after that, points accrue and after 4 missed you receive a £200 fixed penalty. |
## Practical Example
Jane is a landlord earning £60,000 from property in 2025-26. Under MTD, she keeps digital accounts and records expenses monthly using compatible software. Her first quarterly update (6 April–5 July) must be submitted by 7 August 2026. She still must file a Self Assessment return by 31 January 2027. If Jane misses the 7 August update, in the first year no penalty points are applied—but after the first year they are.
## Tips for Compliance
- **Start digital record-keeping immediately** if you haven’t already.
- **Save all receipts & invoices** in digital format.
- Use software that allows previewing your tax position mid-year.
- Consider working with a tax adviser to ensure your software setup is correct and to prepare for future obligations.
MTD for Income Tax marks a structural change—getting organised now offers peace of mind, smoother cash flow, and avoidance of last-minute penalties.