Making Tax Digital for Income Tax: What Sole Traders and Landlords Need to Know Before April 2026 (UPDATED MARCH 2026)
PLEASE NOTE: This article was updated in March 2026 to reflect the latest developments in Making Tax Digital for Income Tax.
From April 2026, a significant change to the UK tax system comes into effect. Making Tax Digital for Income Tax Self Assessment (MTD ITSA) will become mandatory for individuals with £50,000 or more in sole trade or property income. One year later, the threshold will reduce to £30,000, with further expansion expected in subsequent years.
This is not a new tax. It is a digital reporting requirement designed to modernise how income tax is recorded and submitted; reducing errors, simplifying record-keeping, and providing greater visibility over your financial position throughout the year.
This guide explains what is changing, what remains the same, and what you need to do now to ensure a smooth transition.
What MTD for Income Tax Means in Practice
Today, most sole traders maintain their records in a way that suits them, whether through paper records, spreadsheets, or basic bookkeeping tools, before submitting a single annual Self Assessment return each January.
Under Making Tax Digital for Income Tax, this approach changes. From April 2026, individuals above the threshold must keep accounting records digitally and submit quarterly updates to HMRC using compatible software. These updates are summary figures of income and expenses, not full tax returns.
At the end of the tax year, a final digital submission is required to confirm the overall position, replacing the traditional Self Assessment return.
In practice, this means moving from a once-a-year reporting process to a more regular reporting cycle throughout the year.
Importantly, payment deadlines do not change. Tax will still be due on 31 January and, where relevant, 31 July. MTD changes how information is reported, not when tax is paid.
For up-to-date guidance, HMRC provides detailed resources on Making Tax Digital for Income Tax.
Who Must Join, and When
MTD for Income Tax will be introduced in phases, based on your total qualifying income from self-employment and property.
From April 2026
- Sole traders with income over £50,000
- Landlords with income over £50,000
From April 2027
-
Individuals with income between £30,000 and £49,999
From April 2028 (planned)
-
Individuals with income over £20,000
Those earning below £20,000 are not currently required to join, although this may change as the system expands.
Businesses below the threshold can choose to adopt MTD voluntarily, which may offer improved financial visibility and more accurate tax forecasting.
What Income Counts Toward the £50,000 Threshold?
One of the most common areas of confusion is how HMRC calculates whether you fall within Making Tax Digital for Income Tax.
The threshold is based on your total gross income from:
- self-employment (sole trader income)
- property income (UK and overseas rental income)
Importantly, this is turnover, not profit.
This means:
- expenses are not deducted when assessing the threshold
- the figure is based on total income before costs
Examples
- A sole trader earning £52,000 in revenue (with £20,000 expenses) must join MTD
- A landlord earning £30,000 rental income and £25,000 from self-employment (total £55,000) must join MTD
- A sole trader earning £28,000 does not need to join in April 2026, but may be required from April 2027
What Does Not Count
The threshold does not include:
- employment income (PAYE salary)
- dividends from a limited company
- savings or investment income
Why This Matters
Many taxpayers assume they fall below the threshold because their profit is lower, but HMRC assesses eligibility based on gross income. This means some businesses may be required to comply earlier than expected.
If you are unsure whether you meet the threshold, AcuAccounts can review your income and confirm when you will need to comply.
Does This Apply to Limited Companies or Company Directors?
Making Tax Digital for Income Tax applies to individuals, not limited companies.
If you operate through a limited company, these rules do not apply to your company’s income or Corporation Tax obligations.
However, whether MTD applies to you personally depends on your sources of income.
MTD for Income Tax applies to personal income, which means:
- Salary paid through PAYE → not included
- Dividends from a limited company → not included
- Corporation Tax → not affected
You may still need to comply if you have:
- self-employment income outside your company
- rental income from property (UK or overseas)
If your combined income from these sources exceeds the threshold, you will need to follow MTD for Income Tax rules — even if you also run a limited company.
Limited companies are already subject to Making Tax Digital for VAT, where applicable. HMRC is also developing Making Tax Digital for Corporation Tax, although no mandatory start date has been confirmed.
Common Misunderstandings About MTD, and the Reality
Since HMRC announced the phased rollout, a number of misconceptions have caused confusion. Below are some of the most common — and what they mean in practice.
“I will have to pay tax four times a year”
You will not. Quarterly updates are for reporting purposes only. Payment deadlines remain unchanged, with tax still due on 31 January and, where applicable, 31 July.
“I can wait until HMRC signs me up”
HMRC will contact taxpayers who fall within the threshold, but it remains your responsibility to prepare and ensure you are compliant. Leaving this until the deadline increases the risk of errors, penalties, and last-minute disruption.
“This will create more work”
For most businesses, the opposite is true. Maintaining digital records throughout the year spreads the workload more evenly, reducing the pressure and uncertainty that typically builds ahead of the January deadline.
“It will be expensive to comply”
While there may be some initial adjustment, many businesses find that digital record-keeping simplifies their processes and reduces time spent on administration. The focus should be on establishing an efficient and sustainable bookkeeping routine.
“It will complicate VAT submissions”
MTD for Income Tax is designed to align with existing digital VAT requirements, not duplicate them. Businesses already using digital VAT systems will find many of the processes familiar.
Why Acting Now Makes a Difference
With April 2026 approaching, businesses that fall within the £50,000 threshold should now be finalising their approach to Making Tax Digital for Income Tax.
The focus at this stage is not preparation, but ensuring your processes are in place and working.
- Review your current record-keeping
Your records should already be maintained digitally in a consistent and structured way. If you are still relying on spreadsheets or manual processes, this should be addressed immediately. - Ensure your records are up to date
Quarterly reporting requires accurate, up-to-date records. Any backlog should be cleared now to avoid issues when submissions begin. - Establish a regular bookkeeping routine
MTD requires ongoing record-keeping throughout the year. A monthly or weekly routine will ensure your records remain accurate and ready for submission. - Confirm how quarterly submissions will be handled
Decide whether you will manage submissions yourself or work with your accountant. This should be agreed in advance to avoid confusion once reporting begins. - Review your systems and processes
If you use multiple tools or systems, ensure they work together efficiently and support digital record-keeping without manual re-entry. - Speak to your accountant if you are unsure
If you are not confident that your current setup meets MTD requirements, now is the time to review it. Addressing this before April avoids unnecessary disruption and potential compliance issues.
At this stage, the goal is simple: ensure your records, processes, and responsibilities are clear so that the transition into MTD is smooth and controlled.
How AcuAccounts Can Support Your Transition
AcuAccounts supports sole traders and landlords in moving to Making Tax Digital in a structured and practical way — ensuring compliance without unnecessary complexity.
We work with you to:
- review your current record-keeping and identify what needs to change
- establish a clear and sustainable bookkeeping process
- ensure your records are ready for quarterly reporting
- clarify your obligations and reporting timeline under MTD
To suit different working styles and levels of involvement, we offer three levels of support:
Tier 1 – Compliance Review
Client-led with year-end support
- You maintain your bookkeeping
- You prepare and submit quarterly updates
- We review your records at year end
- We prepare and submit the final end-of-year declaration
This option is suitable for clients who prefer to remain hands-on while ensuring year-end compliance.
Tier 2 – Quarterly Accountant Review
Shared responsibility
- You maintain your bookkeeping
- We review your records quarterly
- We prepare and submit the quarterly updates
- We prepare and submit the final end-of-year declaration
This is typically the most popular option, providing a balance between cost and professional oversight.
Tier 3 – Fully Managed
Complete accountant-led service
- We maintain your bookkeeping
- We prepare and submit all quarterly updates
- We prepare and submit the final end-of-year declaration
This option is ideal for clients who want their compliance fully managed you are confident managing your records or prefer full support, we can structure the process in a way that works for your business
📩 info@acuaccounts.com
📞 0203 907 9027
Prepare early, stay digital, and ensure you are ready for April 2026 without the last-minute pressure.
Also starting on November 18th Identity verification for directors, PSCs and LLPs is now required.
Learn what you must do to stay compliant in our other article here.
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