Compliance
Navigating Making Tax Digital: Tips for Sole Traders & Landlords
How the rollout of mandatory quarterly updates under Making Tax Digital affects those earning over £50,000 and what you need to do now.
By NomadicTax Research Team • 5-8 min read • August 23, 2026
## What is Making Tax Digital (MTD) for Income Tax?
Making Tax Digital for Income Tax (MTD ITSA) is the UK government’s initiative to modernise and simplify the tax system. It requires sole traders and landlords whose annual self-employment or property income exceeds certain thresholds to:
- keep digital records, and
- submit quarterly updates via compatible software.
These updates are separate from your Self Assessment tax return (due by 31 January each year). The key dates and thresholds are important to avoid penalties.
## Recent Changes & Your Obligations
From **April 2026**, those earning over **£50,000** from self-employment or property must start using MTD. ([gov.uk](https://www.gov.uk/government/news/436000-sole-traders-and-landlords-make-their-tax-digital?utm_source=openai))
- First quarterly period: 6 April to 5 July 2026, or for some using calendar quarters: 1 April to 30 June 2026. Update deadline: **7 August 2026**. ([gov.uk](https://www.gov.uk/government/news/436000-sole-traders-and-landlords-make-their-tax-digital?utm_source=openai))
- From **September 2026**, HMRC will proactively reach out to those required to join but who haven’t yet. ([gov.uk](https://www.gov.uk/government/news/436000-sole-traders-and-landlords-make-their-tax-digital?utm_source=openai))
- From **April 2027**, threshold drops to **£30,000** income. ([gov.uk](https://www.gov.uk/government/news/436000-sole-traders-and-landlords-make-their-tax-digital?utm_source=openai))
## Common Mistakes & How to Avoid Them
| Mistake | What to Do |
|---|---|
| Missing the quarterly update deadline | If missed, no penalty in 2026-27 but receipts of reminders begin later; ensure submissions via recognised software. ([gov.uk](https://www.gov.uk/government/news/436000-sole-traders-and-landlords-make-their-tax-digital?utm_source=openai)) |
| Using incorrect software or paper records | Use HMRC-recognised digital tools; keep accurate digital bookkeeping. |
| Failing to respond when contacted by HMRC | If you get letters or notices, act quickly—sign up to MTD and submit your updates. |
## Practical Advice to Get Started
- **Select your software** early. Look for bookkeeping or accounting tools that are on HMRC’s recognised software list.
- **Organize your records**: income statements, invoices, receipts—all in digital format.
- **Automate calendar reminders** for update deadlines, especially if you have multiple income streams (rent + self-employment).
- **Use exemptions only if eligible**: digital exclusion, low income, etc. HMRC’s guidance lays out valid reasons.
- **Stay aware**: from autumn 2026, if you have qualifying income over £30,000 and file your 2025-26 return, you’ll receive communications warning you of MTD changes. ([gov.uk](https://www.gov.uk/government/publications/edition-5-making-tax-digital-for-income-tax-software-developer-newsletter/edition-5-making-tax-digital-for-income-tax-software-developer-newsletter?utm_source=openai))
## Example Scenario
> _Sarah is a self-employed graphic designer earning £55,000/year plus £5,000 from property rent. From April 2026, she's in scope of MTD ITSA. She needs to use recognised software to send quarterly updates (April-June, deadline 7 August, etc.), even before her Self Assessment return due 31 January. She should budget time, choose software, and keep digital records._
## Benefits & Long-Term Outlook
While there’s upfront effort—setting up software, keeping digital records—MTD aims to smooth cash flow and help avoid large unexpected tax bills. Over time, updates may include:
- lower thresholds for income,
- more frequent payments, and
- possibly changes to how employment expenses or other reliefs are claimed.
By preparing now, you’ll be better placed to transition smoothly, minimise stress and reduce risk of mistakes or penalties.