Compliance
UK Making Tax Digital (MTD) for ITSA: Preparing Sole Traders and Landlords for Q1 2026
UK sole traders and landlords with qualifying income over £50,000 will need to use Making Tax Digital from April 2026, with further thresholds applying to lower incomes later. Here's how to get ready.
By NomadicTax Research Team • 5-8 min read • November 21, 2025
## Overview of MTD for Income Tax Self Assessment (ITSA)
- **Effective date**: From **6 April 2026**, sole traders and landlords earning over **£50,000** of qualifying income must comply with MTD for ITSA. By **April 2027**, the threshold drops to **£30,000**, and by **April 2028** it will go even lower to **£20,000**. ([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))
- **Qualifying income** includes business and property income—so multiple income streams count. Digital records are required, and quarterly updates plus an annual summary to HMRC are mandatory. ([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 and When
- **From April 2026**: Sole traders and landlords over £50,000.
- **From April 2027**: Those over £30,000.
- **From April 2028**: Those over £20,000.
- **Exemptions/Deferrals**: Certain groups may be exempt or deferred (e.g., for ease of transition), more detail expected in guidance. ([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 Steps to Prepare Now
1. **Upgrade your accounting software** — Make sure it's HMRC-compatible and can handle quarterly submissions.
2. **Organize your records digitally** — All bills, receipts, income statements need to be stored and retrievable digitally.
3. **Forecast cash flow** — More frequent filings mean smaller gaps, but you may need to set aside funds monthly or quarterly.
4. **Understand your thresholds & timelines** — If you’re close to £50,000 income now, plan to register for MTD early.
## Examples
- **Landlord** earning £60,000 per year from rental and business income: must start quarterly digital reporting from April 2026.
- **Sole trader earning £35,000**: can wait until April 2027.
- **Small property owner making £25,000**: will be in scope by April 2028.
## Risks & What Gets Penalized
- Late or incorrect quarterly submissions can lead to penalties or loss of privileges under the scheme.
- Insufficient records might trigger compliance reviews.
- Not upgrading systems in time may lead to cash flow issues or extra compliance costs.
## Tax Planning Tips
- Consider batching expenses before deadline periods to reduce quarterly tax liability.
- If anticipating income just above a threshold, assess whether forming an entity (e.g., limited company) might better manage liabilities.
- Seek professional help to map software needs and ensure compliance smoothly.
**Conclusion**: MTD for ITSA is coming quickly for many sole traders and landlords. Getting digital systems in place, knowing your income thresholds, and preparing for quarterly reporting will make transition smoother and avoid penalties or surprises when April 2026 arrives.