Making Tax Digital (MTD) is the biggest change to the UK tax system in a generation and from April 2026, thousands of sole traders and landlords will move from annual Self Assessment to digital record keeping and quarterly reporting.
If you’re a sole trader earning over £50,000, or a landlord with UK rental income over the same threshold, these changes will apply to you. And with the rollout expanding again in 2027, now is the time to understand what’s coming and prepare.
Below is a breakdown of the rules, timelines, what you must do, and how to get ready.
Who Will Be Affected by MTD?
MTD for Income Tax Self Assessment (MTD ITSA) applies based on qualifying income defined as:
- Your gross sole trader turnover (before expenses)
- Plus your share of gross rental income, if applicable
This combined figure excludes employment income, pensions, dividends and other personal income.
Who must join MTD?
You will have to follow MTD if:
✅You are a sole trader with qualifying income over £50,000 (from April 2026)
✅ You are a landlord with UK rental income above the threshold
✅ You are a non-resident with UK self-employment or UK property income above the threshold
Who is NOT affected?
❌ Limited companies
❌ Partnerships (delayed indefinitely)
❌ Partners unless they also have personal rental income or sole trade income
❌ Individuals under the threshold
When Does MTD Start?
The confirmed dates by HMRC are as follows:
| Qualifying Income | MTD Start Date |
| Over £50,000 | April 2026 |
| £30,000–£50,000 | April 2027 |
What Will Change Under MTD?
Once you meet the threshold, your reporting requirements change significantly:
Digital Record Keeping (Mandatory)
You must keep your records in MTD-compatible software, such as Xero, QuickBooks, or FreeAgent.
Your digital records must include:
- Date of transaction
- Amount
- Category (e.g. sales, travel, rent, repairs)
Paper-based and spreadsheet-only systems will no longer be enough unless linked to approved bridging software.
Quarterly Updates
You’ll submit four quarterly reports each tax year.
Quarterly periods and deadlines:
| Quarter | Period | Deadline |
| Q1 | 6 Apr – 5 Jul | 7 August |
| Q2 | 6 Jul – 5 Oct | 7 November |
| Q3 | 6 Oct – 5 Jan | 7 February |
| Q4 | 6 Jan – 5 Apr | 7 May |
Final Declaration (Replaces the Annual Tax Return)
After your quarterly submissions, you will complete a Final Declaration, which replaces the Self Assessment return for those inside MTD.
This will:
- Combine all your income
- Include adjustments (accruals, prepayments, capital allowances)
- Include non-MTD income such as employment, interest, dividends
- Produce your final tax calculation
Deadlines stay the same:
- Final Declaration: 31 January
- Tax payment: 31 January
How Errors Are Handled Under MTD
Quarterly updates are cumulative, so:
✅ If you miss something in Q2, you can correct it in Q3
✅ If the error is spotted after Q4, you can fix it during your Final Declaration
No need to re-submit individual quarters unless you choose to.
How to Prepare for MTD
Here’s a practical preparation plan:
1. Check your qualifying income
Add your gross business turnover and (if applicable) rental income.
2. Choose MTD-compatible software early
Compare features, bank feeds, mobile apps, and add-ons like receipt scanners.
3. Move to digital record keeping now
Don’t wait until 2026 get used to the system.
4. Clean up your bank feeds
Ensure your business bank account links cleanly.
5. Review your invoicing and expense processes
Quarterly reporting requires consistent habits.
6. Speak to your accountant
Your advisor will guide your setup, help avoid penalties, and plan quarterly reviews.
Conclusion
MTD is not a small update; it’s a shift in how sole traders manage, record, and report their finances.
But with the right digital setup, the transition can actually:
- improve organisation
- increase visibility over tax bills
- streamline admin
- reduce year-end stress
- support better business decisions
Getting ahead now means a smoother, simpler 2026.
If you’d like support choosing software, digitising your processes or preparing for MTD, we’re here to help sole traders transition confidently.
