Compliance
Navigating Making Tax Digital: What Sole Traders & Landlords Must Do
With MTD for Income Tax now live for those earning over £50,000, sole traders and landlords face new quarterly reporting and record-keeping obligations. Here's how to stay compliant and avoid penalties.
By NomadicTax Research Team • 5-8 min read • August 28, 2026
## Introduction
From **6 April 2026**, sole traders and landlords in the UK whose **qualifying income** from self-employment and property exceeds **£50,000** per year must use **Making Tax Digital for Income Tax (MTD ITSA)**. This means keeping digital records, sending quarterly updates, and filing annual returns using compatible software. ([gov.uk](https://www.gov.uk/government/collections/making-tax-digital-for-income-tax?utm_source=openai))
Below are the key steps you need to take, practical examples, and how this fits with the wider tax calendar.
## What is qualifying income?
- It consists of turnover from **self-employment** plus levels of **property income** before expenses; it doesn’t include income from employment or pensions. ([gov.uk](https://www.gov.uk/government/collections/making-tax-digital-for-income-tax?utm_source=openai))
- The test looks at your income in the year **2024-25** for those due to start in April 2026. If your qualifying income then was over £50,000, MTD ITSA applies from **6 April 2026**. ([gov.uk](https://www.gov.uk/government/collections/making-tax-digital-for-income-tax?utm_source=openai))
## Key Obligations and Practical Actions
| Obligation | What you must do | Example |
|---|---|---|
| **Digital Records** | Use MTD-compatible software to record income & expenses, correct errors as soon as you spot them. | If you hire accounting software, ensure it allows joint property-owner records or supports your specific basis period. ([gov.uk](https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/updates?utm_source=openai)) |
| **Quarterly Updates** | Send short updates every quarter via your software. First deadline was **7 August 2026** for many. ([gov.uk](https://www.gov.uk/government/news/436000-sole-traders-and-landlords-make-their-tax-digital?utm_source=openai)) |
| **Annual Self Assessment Return** | Still due by **31 January** following end of tax year; done via compatible software. | For tax year 2025-26, return and payment due by 31 January 2027. |
## Penalties & Exemptions
- For **2026-27 year**, late quarterly updates do **not** attract penalty points. ([gov.uk](https://www.gov.uk/government/news/436000-sole-traders-and-landlords-make-their-tax-digital?utm_source=openai))
- But from **6 April 2027**, those with qualifying income over **£30,000** will also be brought into scope. For income over **£20,000**, mandation begins **6 April 2028**. ([gov.uk](https://www.gov.uk/government/collections/making-tax-digital-for-income-tax?utm_source=openai))
- Certain groups are exempt or deferred: ministers of religion, Lloyd’s underwriters, and taxpayers where digital use is unreasonable. ([gov.uk](https://www.gov.uk/government/publications/making-tax-digital-for-income-tax-and-penalty-reform?utm_source=openai))
## Example Scenario
Let’s say Jane is a landlord with property income of £35,000 and a part-time side business with turnover £20,000 in **2024-25**:
- Her qualifying income = £35,000 + £20,000 = **£55,000** → above the £50,000 threshold for 2024-25.
- Jane must use MTD ITSA from **6 April 2026**.
- She must keep digital records, send quarterly updates, and file annual return via compatible software by **31 January 2027**. If she misses a quarterly deadline in 2026-27, no penalty point yet, but points begin after April 2027.
## Actionable Advice
- **Check your 2024-25 turnover** from self-employment and property to see if you’re in scope now.
- Choose MTD-compatible software early so you’re ready for quarterly updates.
- Review software support for reporting basis periods, joint property ownership, exemptions if needed.
- Keep records regularly—don’t wait until end of year.
- For those below thresholds, consider whether voluntary sign-up may help streamline future compliance.
## What’s Next?
- Threshold lowering will bring in many more taxpayers: **£30,000** from **April 2027**, **£20,000** from **April 2028**. ([gov.uk](https://www.gov.uk/government/publications/making-tax-digital-for-income-tax-self-assessment-reducing-the-mandation-threshold-from-30000-to-20000-from-april-2028/reduction-of-the-mandation-threshold-from-30000-to-20000-from-april-2028?utm_source=openai))
- HMRC will begin **sign-ups from September 2026** for those obligated but not yet enrolled. ([gov.uk](https://www.gov.uk/government/news/436000-sole-traders-and-landlords-make-their-tax-digital?utm_source=openai))
- Important to monitor exemptions and new guidance as system settles in.
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By starting early, choosing proper software, and keeping accurate records, sole traders and landlords can navigate the MTD ITSA changes successfully and with minimal disruption.