Making Tax Digital for Income Tax (MTD) – A Guide for Sole Traders and Landlords
The UK tax system is moving towards a fully digital approach with the introduction of
Making Tax Digital for Income Tax (MTD for IT). These new rules will change how sole traders and landlords keep records and report their income to HM Revenue & Customs (HMRC).
If you run a small business or receive rental income, it is important to understand how these changes may affect you and how you can prepare in advance.
What is Making Tax Digital for Income Tax?
Making Tax Digital (MTD) for Income Tax is part of the UK government’s initiative to modernise the tax system and make it more efficient.
Under the new rules, individuals will be required to:
This process replaces the traditional system where income is reported once a year through
Self Assessment.
The aim is to improve accuracy, reduce errors, and allow taxpayers to have a clearer view of their tax position throughout the year.
Who Will Be Affected?
MTD for Income Tax will be introduced gradually based on income thresholds.
From April 2026
- Sole traders and landlords with gross income above £50,000
From April 2027
- Individuals with gross income above £30,000
From April 2028
- Individuals with gross income above £20,000
If your combined income from self-employment and property exceeds these thresholds, you will need to comply with the new MTD requirements.
When Will MTD Start?
The first reporting period under MTD will begin on 6 April 2026.
The first quarterly update will be due by 7 August 2026.
Once you are within the MTD system, you will need to submit four quarterly updates each year, followed by a final MTD tax return confirming your tax position.
What Records Need to Be Kept?
Under MTD, taxpayers must maintain digital records of their financial activity.
These typically include:
It is important to note that HMRC does not receive detailed transaction data. Only summary totals of income and expenses are submitted as part of the quarterly updates.
Can You Report Multiple Businesses or Properties?
Yes. If you have multiple sources of income, such as:
These can be reported separately within the MTD system while forming part of your overall tax reporting.
Can Quarterly Updates Be Amended?
Yes. If an error is discovered after submitting an update, it can generally be corrected in a later quarterly update or during the final year-end submission.
HMRC expects that minor discrepancies will usually be corrected in the next update or in the final tax return.
Will a Year-End Tax Return Still Be Required?
Yes.
Although quarterly updates will be submitted throughout the year, taxpayers will still need to submit a final MTD tax return at the end of the tax year. This final submission confirms the full tax position and replaces the traditional annual Self Assessment tax return.
How We Can Help
The introduction of Making Tax Digital represents one of the most significant changes to the UK tax system in recent years. Preparing early can help ensure a smooth transition and reduce the risk of errors or penalties.
We can help you:
If you would like advice on preparing for Making Tax Digital for Income Tax, please contact us for guidance.
