Compliance
Preparing for Making Tax Digital for Income Tax: What Sole Traders & Landlords Must Know
From April 2026, sole traders and landlords with over £50,000 income will need to comply with Making Tax Digital for Income Tax (MTD for ITSA). Here’s your plan to stay compliant well ahead of the deadline.
By NomadicTax Research Team • 5-8 min read • March 6, 2026
## What Is MTD for ITSA & Who’s Affected
Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) is the UK government’s digital reporting regime aimed at improving tax accuracy and compliance. From **April 2026**, **sole traders and landlords** whose business or property income exceeds **£50,000** will be **mandated** to:^(a) keep digital records; (b) submit **quarterly updates** using software compatible with HMRC’s MTD rules. ([gov.uk](https://www.gov.uk/government/statistics/making-tax-digital-for-income-tax-business-population-statistics/making-tax-digital-for-income-tax-business-population-statistics-commentary?utm_source=openai))
The scope will broaden:
- **April 2027**: income above £30,000.
- **April 2028**: income above £20,000. ([gov.uk](https://www.gov.uk/government/statistics/making-tax-digital-for-income-tax-business-population-statistics/making-tax-digital-for-income-tax-business-population-statistics-commentary?utm_source=openai))
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## Key Compliance Requirements
- Maintain **digital records** of all income and expenditure throughout the year, using MTD-compatible software. Spreadsheets alone may not qualify unless bridged properly. ([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))
- Submit **quarterly updates**: cumulative totals year to date. These reports will reduce end-of-year work but require continuous record-keeping. ([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))
- Filing an annual declaration and tax return still required, but with less retrospective adjustment. ([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))
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## Practical Steps to Get Ready
- Identify whether your **income threshold** exceeds the upcoming deadlines. Be aware of income sources (business, property) in aggregate. ([gov.uk](https://www.gov.uk/government/statistics/making-tax-digital-for-income-tax-business-population-statistics/making-tax-digital-for-income-tax-business-population-statistics-commentary?utm_source=openai))
- **Choose suitable software**: Ensure it meets HMRC’s requirements, records digitally, allows quarterly submission. Take part in testing if available. ([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))
- Streamline bookkeeping: categorise expenses clearly, keep receipts/scanned docs, monitor ongoing profits to forecast tax liability. Helps with quarterly forecasts and reducing surprises.
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## Case Example
Emily is a sole trader with £60,000 income from freelancing and £10,000 rental income. From April 2026 she must join MTD-ITSA, keeping digital books and submitting quarterly updates. By April 2027, with her income still above £30,000, the same applies for her rental portfolio. She opts for software that allows categorised expense inputs and previewing cumulative totals, improving real-time visibility and reducing end-year tax shocks.
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## Common Pitfalls and How to Avoid Them
- **Missing timing deadlines**: failing to join MTD when required leads to penalties. Mark key dates in your calendar.
- **Using incompatible software**: ensure software certified for MTD; avoid general accounting tools without HMRC compatibility.
- **Poor record-keeping**: quarterly updates demand accuracy; backlog or inconsistent categorisation can lead to costly amendments later.
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## Impact Summary
While the changes introduce more administrative work, they offer benefits: better cash flow planning, avoiding large end-of-year tax bills, catching errors earlier, and smoother compliance. For those prepared, the transition into MTD-ITSA is an opportunity, not just a compliance cost.