Compliance
Preparing for Making Tax Digital (MTD) for Income Tax: A Guide for Sole Traders and Landlords
From April 2026, self-employed individuals and landlords in the UK with qualifying income over £50,000 will need to comply with MTD for Income Tax—it’s time to gear up now.
By NomadicTax Research Team • 5-8 min read • April 6, 2026
## Overview of MTD for Income Tax (Self Assessment)
Making Tax Digital for Income Tax Self Assessment (**MTD for ITSA**) is being rolled out in phases:
| Phase | Qualifying Income Threshold | Effective Date |
|---------|-----------------------------|------------------|
| Phase 1 | Gross income (self-employment + property) **over £50,000** | **6 April 2026** ([gov.uk](https://www.gov.uk/government/publications/extension-of-making-tax-digital-for-income-tax-self-assessment-to-sole-traders-and-landlords/making-tax-digital-for-income-tax-self-assessment-for-sole-traders-and-landlords?utm_source=openai)) |
| Phase 2 | Over £30,000 | **6 April 2027** ([gov.uk](https://www.gov.uk/government/publications/extension-of-making-tax-digital-for-income-tax-self-assessment-to-sole-traders-and-landlords/making-tax-digital-for-income-tax-self-assessment-for-sole-traders-and-landlords?utm_source=openai)) |
| Phase 3 | Over £20,000 | **6 April 2028** ([gov.uk](https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/keep-digital-records?utm_source=openai)) |
## Key Obligations Under MTD for ITSA
If you're in scope (beginning 6 April 2026 or later):
- **Keep digital records** of income, expenses, and relevant tax data using HMRC-approved **compatible software**. ([gov.uk](https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/keep-digital-records?utm_source=openai))
- **Submit quarterly updates** to HMRC—progressive reporting of income and expenditure. ([gov.uk](https://www.gov.uk/government/publications/extension-of-making-tax-digital-for-income-tax-self-assessment-to-sole-traders-and-landlords/making-tax-digital-for-income-tax-self-assessment-for-sole-traders-and-landlords?utm_source=openai))
- **Filing Self Assessment returns through the MTD system** using software rather than just manually. ([gov.uk](https://www.gov.uk/government/publications/extension-of-making-tax-digital-for-income-tax-self-assessment-to-sole-traders-and-landlords/making-tax-digital-for-income-tax-self-assessment-for-sole-traders-and-landlords?utm_source=openai))
## Who’s Affected First?
- Sole traders and landlords with **qualifying income above £50,000** for the **2024-2025 tax year** will need to start MTD from **6 April 2026**. ([gov.uk](https://www.gov.uk/guidance/check-when-to-sign-up-for-making-tax-digital-for-income-tax?utm_source=openai))
- If your income total from self-employment and property is under that threshold, for now, you can remain on the existing system—but staying informed is still helpful.
## Transition Steps & Action Plan
- **Assess your qualifying income now**: Look at gross earnings before expenses; HMRC uses the last submitted tax return to determine your status. ([makingtaxdigital.campaign.gov.uk](https://makingtaxdigital.campaign.gov.uk/get-ready-for-making-tax-digital/?utm_source=openai))
- **Select suitable software**: It must be MTD-compatible. Many accounting tools are preparing; early adoption can help you test workflows.
- **Start digital record-keeping ahead of time**: Even if you're not yet required, establishing good digital habits (e.g. consistent categories, accurate levels) will smooth the transition.
- **Monitor HMRC communications**: If your income in 2024-25 is close to £50,000, especially, expect HMRC to write to you confirming you’ll need to comply from April 2026. ([gov.uk](https://www.gov.uk/government/publications/agent-update-issue-128/issue-128-of-agent-update?utm_source=openai))
- **Check for exemptions**: There are options if you’re digitally excluded or for whom compliance is unreasonable; review conditions carefully.
## Example Scenarios
- **Alex** is a landlord with £55,000 property income and no other business income—it’s April 2026, and they must begin using MTD for ITSA.
- **Priya** runs a small Instagram shop earning £12,000/year profit and also rents a room bringing her total self-employment + property income to £33,000: Priya is under the £50,000 threshold now, but will be caught in Phase 2 lifecycle in **April 2027**.
## Why It Matters & Takeaways
- These changes represent the **biggest overhaul of UK income reporting for sole traders and landlords** since Self Assessment’s introduction. It’s designed to modernise tax, reduce errors, and improve timing and consistency. ([gov.uk](https://www.gov.uk/government/news/one-year-until-making-tax-digital-for-income-tax-launches?utm_source=openai))
- Being **proactive**—by keeping records clean, choosing software early, and understanding your income—can avoid penalties and reduce compliance friction.
- For those likely to cross thresholds in upcoming tax years, planning ahead (including incorporation or other income-splitting strategies) might help manage exposure.
**Category**: Compliance
**Author**: NomadicTax Research Team
**ReadTime**: 5-8 min
**Published**: true