Making Tax Digital for Income Tax went live on 6 April 2026, and if you're a sole trader or landlord with income over the threshold, you're now several months into a completely different way of reporting your income to HMRC. If you're still catching up on what actually changed, here's where things stand.
Who's Actually Affected Right Now
The first phase applies to sole traders and landlords with qualifying income over £50,000, based on your 2024/25 tax return. Qualifying income means your gross income from self-employment and property combined, before expenses — not your profit.
If your qualifying income was between £30,000 and £50,000 in the 2025/26 tax year, your turn comes in April 2027. Below £30,000, you're not yet affected, though the threshold is due to drop to £20,000 from April 2028.
What Quarterly Reporting Actually Involves
Instead of one Self Assessment return per year, you now submit a digital update to HMRC every three months, summarising your income and expenses for that period. These quarterly updates aren't tax returns and don't trigger a payment — they're a running record. At the end of the tax year, you submit a final declaration that confirms your figures and calculates what you actually owe.
The One Piece of Good News
HMRC has confirmed there are no penalties for late quarterly submissions in this first year. That's a genuine easement — but it's not a reason to ignore the system. You're still legally required to comply from day one, and the penalty holiday won't last, so the sooner your record-keeping habits are solid, the less disruptive next year's tighter enforcement will be.
You Cannot Use a Spreadsheet Alone
This catches people out more than anything else. You must use HMRC-recognised MTD-compatible software to keep digital records and submit your updates — a spreadsheet on its own, even a well-organised one, doesn't satisfy the requirement unless it's linked to compatible bridging software. Options include Xero, FreeAgent, QuickBooks, and Sage, along with property-specific tools like Hammock for landlords with multiple properties.
If You've Already Missed a Quarter
If you were supposed to start in April 2026 and haven't submitted anything yet, the priority is simple: get compatible software set up now and submit your outstanding updates as soon as you can. Because there's no late-submission penalty this year, catching up now costs you nothing except the time it takes — but that grace period narrows every quarter you leave it.
What Counts as a Digital Record
Every transaction — income received and expense incurred — needs to be recorded digitally in your software, capturing the date, amount, and category. You don't need to scan every receipt, but you do need each transaction logged in a system your software can pull from automatically to build your quarterly updates.
Landlords: A Few Specific Points
If your income comes from property, your gross rental income counts toward the £50,000 threshold — combined with any self-employment income you also have. A landlord earning £35,000 in rent and £20,000 from freelance work is over the threshold on a combined £55,000, even though neither figure alone would trigger it.
Frequently Asked Questions
Does MTD replace my Self Assessment return entirely?
Yes, once you're in scope — quarterly updates plus a final declaration replace the single annual return for your business and property income.
What if my income drops below the threshold next year?
You generally stay in MTD once you're brought in, though HMRC has provisions for exiting if your income falls and stays below the threshold for a sustained period — check current guidance for your specific situation.
Are partnerships included yet?
No. Partnerships are not included in the current rollout and will be brought in at a later, unconfirmed date.
Read next: How to Choose MTD-Compatible Software — A Guide for Sole Traders and Landlords
Where to Go From Here
If you want a complete walkthrough — including a decision tree to confirm exactly when MTD applies to you, software comparisons, and worked examples for sole traders, landlords, and mixed-income situations — the Making Tax Digital Survival Blueprint covers the whole process in plain English.
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This article is for educational and informational purposes only and does not constitute legal, accounting, or tax advice. HMRC rules are subject to change. Always verify current requirements with HMRC and seek professional advice where appropriate.