Compliance
Preparing for Making Tax Digital: What Sole Traders & Landlords Need to Know
From April 2026, many sole traders and landlords in the UK will be required to adopt Making Tax Digital for Income Tax Self Assessment. Here's what that means and how to prepare.
By NomadicTax Research Team • 5-8 min read • November 23, 2025
## What is MTD for ITSA?
Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is a UK government initiative that requires eligible self-employed individuals and landlords to keep **digital records** and send HMRC *quarterly summaries* of their business or property income and expenses. ([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 is affected & when
- From **6 April 2026**, those with qualifying income **over £50,000** (from sole trade or property) must comply. ([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))
- From **6 April 2027**, threshold will reduce to **£30,000**, then to **£20,000** from **6 April 2028**. ([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))
- Individuals with income below thresholds can sign up voluntarily now. ([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))
## Key practical steps to prepare
| Step | Action |
|---|---|
| 1. Understand qualifying income | Gross income from self-employment + property before expenses or reliefs; not ‘profit’ post-expenses. ([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. Software selection | HMRC-compatible digital accounting tool required. Explore software vendors, ensure digital records and quarterly reporting features. |
| 3. Start keeping better records | Even before mandation, begin timely record-keeping, categorising income/expenses, properly allocate property income. |
| 4. Participate in testing phase | Agents and clients can sign up for beta testing now to access support, iron out processes. ([gov.uk](https://www.gov.uk/government/publications/agent-update-issue-122/issue-122-of-agent-update?utm_source=openai)) |
| 5. Budget for time & cost | Transition involves one-off setup and ongoing maintenance. Estimate modest around-£100-£350 annual extra cost depending on income band. ([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)) |
## Examples to illustrate
- **Case A**: Sarah, a landlord bringing in **£55,000** from properties in 2025-26 will need to begin using MTD for ITSA from 6 April 2026.
- **Case B**: Tom, a graphic designer earning **£28,000** self-employed in 2025-26, won’t need to until April 2027, but can sign up early to test the system.
## Benefits and challenges
**Benefits**
- More accurate tax reporting sooner in the year, avoiding surprises at tax time.
- Better budgeting and cash flow planning via quarterly tax insights.
- Reduced late-submission risk once familiar with software.
**Challenges**
- Learning curve for digital tools, especially for those used to manual systems.
- Upfront small cost, time to organise and digitise historic records.
- Ensuring compliance when circumstances change (e.g. income spikes, or ceasing self-employment).
## Action plan checklist
- [ ] Assess your 2023-24 and expected 2024-25 income to see if threshold applies.
- [ ] Choose a suitable software provider and test its compatibility.
- [ ] Start organising records now – invoices, receipts, property income details.
- [ ] If you have an agent, ensure they’re familiar with MTD for ITSA requirements.
- [ ] Sign up for HMRC’s notifications / letters so you don’t miss the official requirement.
**Bottom line:** If you’re a sole trader or landlord, especially with income above £50,000, it’s time to get ready for MTD for ITSA. Begin now to avoid stress and penalties in 2026-27.