Compliance
Preparing for Making Tax Digital: What Sole Traders and Landlords Need to Know
The UK is phasing in Making Tax Digital (MTD) for Income Tax from 6 April 2026—here’s what sole traders and landlords must do now to avoid penalties.
By NomadicTax Research Team • 5-8 min read • March 7, 2026
## What Is MTD for Income Tax?
Making Tax Digital for Income Tax (MTD for ITSA) is a major overhaul of how sole traders and landlords will record income and file returns. Under this system, those with **combined gross income from self-employment and property over certain thresholds** must:
- keep digital records via HMRC-recognised software;
- submit **quarterly updates** of income and expenses;
- complete an end-of-year return, which will use these quarterly updates plus HMRC-held data. ([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 When
| Tax year | Qualifying income threshold | Mandatory start date |
|---|---|---|
| 2024-25 | Gross income over £50,000 | From **6 April 2026** ([gov.uk](https://www.gov.uk/guidance/get-ready-for-mtd-an-agent-toolkit/understanding-making-tax-digital-for-income-tax?utm_source=openai)) |
| 2025-26 | Gross income over £30,000 | From **6 April 2027** ([gov.uk](https://www.gov.uk/guidance/get-ready-for-mtd-an-agent-toolkit/understanding-making-tax-digital-for-income-tax?utm_source=openai)) |
| 2026-27 | Gross income over £20,000 | From **6 April 2028** ([gov.uk](https://www.gov.uk/guidance/get-ready-for-mtd-an-agent-toolkit/understanding-making-tax-digital-for-income-tax?utm_source=openai)) |
"Qualifying income" refers to total gross receipts from self-employment and property before costs or deductions. ([gov.uk](https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/updates?utm_source=openai))
## New Penalty Regime – But with Grace for Early Adopters
- Submissions not meeting the deadline lead to **penalty points**. Once an individual accrues **4 points**, a financial penalty (usually £200) is applied. ([gov.uk](https://www.gov.uk/guidance/get-ready-for-mtd-an-agent-toolkit/understanding-making-tax-digital-for-income-tax?utm_source=openai))
- Those joining MTD from 6 April 2026 won’t incur penalty points for **their first 4 quarterly updates**, giving time to settle into the new system. ([assets.publishing.service.gov.uk](https://assets.publishing.service.gov.uk/media/6807527fe16c376084e7c751/making-tax-digital-for-income-tax-agent-toolkit.pdf?utm_source=openai))
- Late payment penalties become more proportionate, based on how long payments are late (regime announced in Autumn Budget 2025) rather than harsh fixed penalties. ([gov.uk](https://www.gov.uk/government/publications/edition-3-ready-steady-file/edition-3-ready-steady-file?utm_source=openai))
## How to Prepare Today
1. **Check your latest Self-Assessment return** — is your combined gross self-employment + property income over £50,000 for 2024-25? If yes, you’re in scope from 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))
2. **Choose compatible software** that supports:
- digital record-keeping;
- quarterly summary submissions;
- calendar quarter options if your accounting period ends 31 March. ([developer.service.hmrc.gov.uk](https://developer.service.hmrc.gov.uk/guides/income-tax-mtd-end-to-end-service-guide/documentation/make-updates-during-tax-year.html?utm_source=openai))
3. **Register early**. HMRC is writing to those likely to be affected so you know ahead of time. Agents should start signing up clients now. ([gov.uk](https://www.gov.uk/government/publications/agent-update-issue-128/issue-128-of-agent-update?utm_source=openai))
4. **Stay on top of updates and guidance**, including changes to penalty schedules and draft legislation. HMRC issues interim guidance and technical specifications for mandatory payrolling, benefits-in-kind, and other compliance items. ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai))
## Practical Examples
- *Emily* is a landlord; her 2024-25 property income is £25,000 and she also has £30,000 self-employment income. With a combined total of £55,000, she must use MTD from **6 April 2026**.
- *David* is a sole trader earning £45,000 in 2024-25 and no property income. He’s **under** the £50,000 threshold, so he’s not mandated until **April 2027** if his income crosses £30,000 in 2025-26.
## Actionable Tips
- **Keep records digitally now**, even if you’re not yet mandated—you’ll save time later.
- Use the “calendar quarter” election if your accounting year is 1 April-31 March to align with software deadlines and avoid small date adjustments. ([developer.service.hmrc.gov.uk](https://developer.service.hmrc.gov.uk/guides/income-tax-mtd-end-to-end-service-guide/documentation/make-updates-during-tax-year.html?utm_source=openai))
- Consider seeking advice from an **agent or accountant**, especially if you have mixed income sources or foreign properties.
By preparing in advance, those affected will avoid penalties, reduce stress when legislative changes take effect, and benefit from a smoother, more transparent way of managing their tax affairs.