Compliance
Navigating the New Wave: Making Tax Digital for Income Tax in Action
UK sole traders and landlords with qualifying income over £50,000 are now firmly within the scope of the new Making Tax Digital (MTD) rules—here’s how to adapt for a smoother transition.
By NomadicTax Research Team • 5-8 min read • June 9, 2026
## What is Making Tax Digital (MTD) for Income Tax?
From **6 April 2026**, the UK has officially rolled out **MTD for Income Tax**. If you're a sole trader or landlord with **combined gross income from self-employment and property exceeding £50,000**, you are required to:
- Keep your tax and business records **in digital format** using software that’s **MTD-compatible**. ([legislation.gov.uk](https://www.legislation.gov.uk/uksi/2026/336/pdfs/uksiem_20260336_en_001.pdf?utm_source=openai))
- Submit **quarterly updates** to HMRC during the tax year. ([legislation.gov.uk](https://www.legislation.gov.uk/uksi/2026/336/pdfs/uksiem_20260336_en_001.pdf?utm_source=openai))
- File an **end-of-year final declaration**, replacing or supplementing the traditional Self Assessment. ([legislation.gov.uk](https://www.legislation.gov.uk/uksi/2026/336/pdfs/uksiem_20260336_en_001.pdf?utm_source=openai))
The regime will be phased in for lower income thresholds in subsequent years:
| From | Threshold |
|---|---|
| April 2027 | £30,000 income |
| April 2028 | £20,000 income |
## Who’s exempt (for now)
Some categories **permanently or temporarily exempt** from MTD include:
- Ministers of religion, Lloyd’s underwriters, individuals with power of attorney ([legislation.gov.uk](https://www.legislation.gov.uk/uksi/2026/336/pdfs/uksiem_20260336_en_001.pdf?utm_source=openai))
- Non-UK resident entertainers or sportspeople (if no other qualifying UK income) ([gov.uk](https://www.gov.uk/government/publications/budget-2025-overview-of-tax-legislation-and-rates-ootlar/budget-2025-overview-of-tax-legislation-and-rates-ootlar?utm_source=openai))
- Those who are digitally excluded (e.g. unable to access digital tools) also have exemption paths. ([legislation.gov.uk](https://www.legislation.gov.uk/uksi/2026/336/pdfs/uksiem_20260336_en_001.pdf?utm_source=openai))
## Examples in Practice
Imagine Sam, a landlord with rental income of £40,000 per year and a small self-employed graphic design side hustle bringing in £15,000. Her income from both sources totals **£55,000**, pushing her into MTD from **April 2026**. She must use MTD-compatible software, submit quarterly updates, and file the final declaration.
On the other hand, Alex, whose combined income is £28,000, will be mandated to join MTD in **April 2027**. Until then, Alex could voluntarily sign up or continue under Self Assessment as before.
## Actionable Steps for Compliance
1. **Audit your income sources** now to see if your gross income exceeds £50,000 (next thresholds: £30,000 in 2027; £20,000 in 2028).
2. **Buy or subscribe** to MTD-compatible software that supports digital record keeping and quarterly updates.
3. **Understand your reporting calendar**: decide whether to align updates to standard calendar quarters or tax-year quarters. ([legislation.gov.uk](https://www.legislation.gov.uk/uksi/2026/336/pdfs/uksiem_20260336_en_001.pdf?utm_source=openai))
4. **Check if you're exempt** and document any reason: e.g. power of attorney, entertainment status, digital exclusion.
5. **Train or assist** your accountant/bookkeeper—everyone involved must understand the new workflow.
6. **Plan cashflow**—with quarterly updates, you’ll have visibility through the year, but also responsibility to keep on top of taxes so you’re not caught out at year-end.
## Key Risks & Benefits
- **Benefits** include reduced last-minute cramming, better forecasting, fewer errors, and more consistent business data throughout the year.
- **Risks** include software costs, potential changes to working practices, penalties for non-compliance (though penalty reform comes alongside MTD). ([gov.uk](https://www.gov.uk/government/publications/budget-2025-overview-of-tax-legislation-and-rates-ootlar/budget-2025-overview-of-tax-legislation-and-rates-ootlar?utm_source=openai))
## Conclusion
If you're in scope already, don’t wait—begin tracking income and expenses in MTD-compatible software. If you're due to be included in future years (2027-28), plan ahead. MTD isn’t just a tax rule; it’s a shift in process. Adapting sooner can mean less stress, more accuracy—and potentially financial advantages.