Making Tax Digital 2026: what sole traders and landlords need to do starting April next year

You are not alone. Making Tax Digital 2026 has caused a lot of confusion, mainly because the rules feel abstract and the start date still sounds far away. But for many people, especially those with growing business or property income, the changes will be significant.​

In this guide, I will explain what Making Tax Digital for Income Tax actually is, who it affects, when it starts, and how it changes the way you currently do Self Assessment. I will also cover what you can do now to prepare calmly and avoid a stressful scramble later on.​

What is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax, often shortened to MTD for Income Tax or MTD ITSA, is HMRC’s plan to change how sole traders and landlords report their income.​

At the moment, most people file one Self Assessment tax return per year. You keep your records however you like, then send everything to HMRC after the end of the tax year.​

Under Making Tax Digital, that changes.

Instead of one annual return, people within scope will need to:

• Keep digital records of income and expenses
• Send quarterly updates to HMRC
• Submit an End of Period Statement after the tax year for each business or property source
• Make a final declaration to confirm all income and tax due, replacing the SA100 for those in MTD​

In simple terms, Making Tax Digital replaces the single yearly Self Assessment process for many affected individuals with regular digital reporting throughout the year, using approved software.​

It does not mean you pay tax four times a year, but it does mean HMRC receives information more often, with a final year‑end tidy‑up similar to what you do now.​

Is Self Assessment ending?

This is one of the most common questions.

Self Assessment as a system is not disappearing entirely, but for many sole traders and landlords above certain income thresholds, the traditional annual SA100 filing will be replaced by the Making Tax Digital process (quarterly updates, End of Period Statements and a final declaration).​

If you are below the thresholds, you will continue filing a normal annual Self Assessment tax return as you do now. Some people who are in MTD for their business or property income may still need SA‑style reporting for other types of income (for example some foreign or trust income), but for many, MTD will take over from the SA100 for their core trading and property income.​

Who has to follow MTD rules, and when?

The rollout of Making Tax Digital for Income Tax is happening in stages. The key factor is your gross qualifying income, not your profit.

For these purposes, qualifying income means the total of your self‑employment and/or property income; employment income does not count towards the thresholds.​

From April 2026

You will need to follow MTD rules if:

• You are a sole trader and your annual business income from self‑employment is over £50,000, or
• You are a landlord and your total rental income is over £50,000, or
• You have a combination of self‑employment and property income that is over £50,000 in total.​

This applies to your gross income from those sources, not profit after expenses.​

From April 2027

The threshold is expected to drop to:

• £30,000 or more in annual qualifying income from self‑employment and/or property.​

This means many more sole traders and landlords will be brought into scope.

If you are below the threshold

If your qualifying income is below the relevant threshold:

• You can continue using normal Self Assessment.
• You do not need to submit quarterly MTD updates.
• You do not need to use MTD‑compatible software yet.​

However, many people close to the threshold will still choose to prepare early.

Simple examples

• A sole trader earning £55,000 in turnover from their business in 2025 will need to follow MTD rules from April 2026.​
• A landlord with three rental properties earning £60,000 in gross rent will be in scope from April 2026.​
• A freelancer earning £28,000 in business income can continue with standard Self Assessment for now, unless property income pushes them over the threshold.​

What changes compared to your current Self Assessment?

This is where the biggest confusion tends to sit.

What you do now

Under the current system, you typically:

• Keep records in a spreadsheet, notebook, software, or a folder of invoices and receipts.
• File one Self Assessment tax return after the tax year.
• Pay tax by 31 January.​

What changes under Making Tax Digital

If you are in scope for Making Tax Digital 2026, you will:

• Keep your business and/or rental records digitally in software or approved spreadsheets.
• Send four quarterly updates to HMRC each year for each MTD business or property source.
• Submit an End of Period Statement to finalise figures, including adjustments and reliefs.
• Submit a final declaration covering all your income, similar in role to the current SA100.​

What stays the same

Despite the new reporting structure:

• You still pay income tax in broadly the same way.
• Tax rates and allowances do not change just because of MTD.
• The tax year dates remain the same.
• You still have a year‑end process to finalise your figures.​

The big difference is how often HMRC receives data and the requirement to keep digital records, not how much tax you pay.​

Do I really have to submit something every quarter?

Yes, if you are within scope, quarterly updates are mandatory.

However, it is important to understand what these updates are.

Quarterly updates:

• Are summaries, not final tax bills.
• Do not require every year‑end adjustment or claim to be included at that point.
• Are designed to give HMRC and you a running picture of your income and estimated tax position.​

They are not meant to be as detailed or stressful as a full tax return, but they do require discipline and a system that works for you.

What records you will need to keep (and how)

Making Tax Digital requires digital record keeping. For many people, this is the biggest change.​

What counts as digital records?

You will need to record, for each business or property:

• Income received.
• Business or rental expenses.
• Dates and amounts.
• Categories such as rent, repairs, travel, or office costs.​

This must be done in:

• MTD‑compatible accounting software, or
• Digital spreadsheets that are linked to HMRC using approved bridging tools.​

What does not work anymore

For those in scope, MTD means:

• Paper‑only records are not enough.
• Shoeboxes of receipts with totals keyed in once a year will not meet the digital link rules.
• Manually typing annual totals into HMRC’s online Self Assessment form will not be compliant.​

You can still keep receipts in paper form if you want, but the records themselves must be kept digitally.

Do I have to use software for Making Tax Digital?

In most cases, yes.

HMRC requires MTD ITSA submissions to be made through compatible software that can keep digital records and send updates via a digital link. This could be:

• Full bookkeeping software.
• Simpler tools designed for sole traders or landlords.
• Spreadsheets combined with MTD bridging software.​

The right choice depends on:

• How complex your income is.
• Whether you manage one business or several.
• Whether you prefer doing things yourself or outsourcing.

HMRC publishes and maintains a list of MTD‑compatible software, and using something from that list is usually the safest way to stay compliant.​

The key is that the system you use must be compliant, not necessarily that it is the biggest or most expensive product.

How to get ready before April 2026

Even though April 2026 sounds far away, preparing early makes a huge difference.

Here is a calm, practical way to approach it.

1. Check if you are likely to be over the threshold

Look at:

• Your business and property income over the last two or three years.
• Whether your business or rental income is growing.
• Whether inflation or rent increases might push you over the line.

If you are close to £50,000 (or later £30,000), it is wise to assume you may be affected and plan on that basis.​

2. Choose a system that suits you

You do not need the most complex software on the market.

Focus on:

• Ease of use.
• MTD compliance.
• Clear reporting and export options.
• Available support if you need help.

Some people prefer full bookkeeping software; others want a lighter‑touch solution or a spreadsheet with bridging.​

3. Start keeping digital records now

Even if you are not yet required to submit quarterly updates, starting digital record keeping early helps you:

• Get used to the process before it is compulsory.
• Avoid last‑minute changes to your workflow.
• Spread the learning curve over time rather than cramming it into 2026.​

This is especially useful for landlords with multiple properties or sole traders with lots of small transactions.

4. Get advice if your situation is complex

If you have:

• Multiple income streams.
• Overseas income.
• Jointly owned property.
• A mix of PAYE, self‑employment and property income.

It is worth speaking to an accountant or tax service early, so you understand exactly how MTD ITSA will apply to you and avoid surprises.​

What happens if you do nothing?

For people who are required to follow Making Tax Digital, ignoring the changes is risky.

Potential consequences include:

• Non‑compliance penalties for missed or incorrect submissions.
• Missed quarterly updates and final declarations.
• Increased HMRC scrutiny and more questions.
• A stressful rush close to new deadlines.​

HMRC’s direction of travel is clear. Digital reporting is not optional for those in scope once their start date arrives.​

Feeling unsure? You do not have to handle this alone

Many sole traders and landlords worry that Making Tax Digital will massively increase their admin. It does not have to.

An online MTD‑compliant service can:

• Set you up with the right software from HMRC’s compatible list.
• Migrate your existing records into a digital system.
• Handle quarterly updates on your behalf.
• Manage year‑end submissions (EOPS and final declaration).
• Keep you compliant without constant worry.​

For many people, this is less stressful and often cheaper than trying to piece everything together themselves at the last minute.

Final thoughts on Making Tax Digital 2026

Making Tax Digital 2026 is a big change for sole traders and landlords, but it does not need to be frightening. At its core, it is about moving from an annual reporting mindset to a more regular, digital one.​

If you are likely to be affected, the best thing you can do is start preparing calmly and early. Understand the rules, choose a system that works for you, and avoid leaving everything until the last minute.​

And if you want peace of mind, support and compliance without drowning in admin, using an online service to manage Making Tax Digital for Income Tax can be the simplest way to stay on the right side of HMRC while focusing on running your business or managing your property.​