Making Tax Digital for Income Tax in 2026: Who Needs to Act Now?
If you are a sole trader or landlord, Making Tax Digital for Income Tax is no longer something to think about “later”. HMRC says it becomes mandatory from 6 April 2026 if you are already in Self Assessment and your qualifying income from self-employment, property, or both was more than £50,000 on your 2024 to 2025 tax return. HMRC also says qualifying income is your gross income before expenses, not your profit.
That point matters because a lot of people are checking the wrong figure. If you are looking at profit instead of gross self-employment and property income, you may think MTD does not apply when in fact it does. HMRC’s guidance on who needs to use Making Tax Digital for Income Tax and working out your qualifying income is the starting point.
What is Making Tax Digital for Income Tax?
HMRC describes Making Tax Digital for Income Tax as the new way for sole traders and landlords to do Self Assessment. Instead of keeping records however you like and filing one tax return at the end of the year in the old way, you will need to use compatible software to keep digital records, send quarterly updates, and then complete your tax return through that software. HMRC’s overview of using Making Tax Digital for Income Tax sets out the main stages.
In practical terms, that means three main obligations. You will need to use software to create and store digital records, send quarterly updates of your income and expenses, and submit your tax return by 31 January after the end of the tax year. HMRC says that is how the new system works for those within scope.
Who needs to act now?
Right now, the people who need to act are sole traders and landlords whose 2024 to 2025 tax return shows qualifying income over £50,000. HMRC says those people will need to use MTD for Income Tax from 6 April 2026. HMRC also says those with qualifying income over £30,000 on their 2025 to 2026 tax return will need to use it from 6 April 2027, and those over £20,000 on their 2026 to 2027 tax return will need to use it from 6 April 2028.
That means some businesses do need to act now, but not everyone. One common mistake is assuming every sole trader is automatically in from April 2026. HMRC is clear that the rollout is phased and based on qualifying income from previous tax returns.
What counts as qualifying income?
HMRC says qualifying income is the total amount you get in a tax year from self-employment and property income. It can come from more than one business or more than one property source. HMRC also says other sources of income reported through Self Assessment do not count towards qualifying income for MTD purposes.
This is another area where people get caught out. If you have both rental income and sole trader income, HMRC looks at the combined qualifying income from those sources. So someone with £28,000 of sole trader turnover and £24,000 of property income is not under the threshold just because neither figure exceeds £50,000 on its own. HMRC’s qualifying income guidance makes clear that the relevant figure is the total from self-employment and property.
What will you actually have to do?
If you are within scope, HMRC says you will need to choose software that works with MTD for Income Tax before you sign up. That software must be able to keep digital records and submit information to HMRC. HMRC’s software guidance and get your software ready guidance explain what the software needs to do and when to authorise it.
After that, HMRC says you or your agent need to create digital records of your self-employment and property income and expenses. HMRC also says you still need to keep original records or supporting documents in the usual way for Self Assessment purposes, even though you are also keeping digital records in software.
Then, every three months, your software will use those digital records to create totals for each income and expense category and send them to HMRC as quarterly updates. HMRC says you do not need to make accounting or tax adjustments before sending a quarterly update. That is an important practical point, because some people assume each quarterly submission is like a mini final tax return. It is not.
What are the quarterly deadlines?
HMRC says the quarterly update deadlines for the 2026 to 2027 tax year are 7 August, 7 November, 7 February and 7 May. HMRC’s penalties guidance also says there are no penalties for missing a quarterly update deadline for the 2026 to 2027 tax year, although digital records still need to be kept and quarterly updates still need to be sent before the tax return can be submitted.
That does not mean 2026 to 2027 is a free pass. It means the first year gives some breathing room on quarterly update penalties, but HMRC is still expecting people to get set up properly and use the system. Treating the first year as optional would be a mistake.
What about penalties?
HMRC says new late submission and late payment penalties apply from the tax year you join MTD for Income Tax. The late submission regime is points-based, with a threshold of 4 points and a £200 penalty once that threshold is reached, plus another £200 for each further missed deadline after that. HMRC also says there are new late payment penalties, and in the first year of the new penalties you effectively have 30 days from the payment due date to pay in full or agree a payment plan before late payment penalties start to apply.
Again, the important nuance is that HMRC has carved out the first year of quarterly update penalties for 2026 to 2027, but not the wider move to the new penalty regime. So it still makes sense to get ahead of this rather than waiting until submissions are due.
Can anyone be exempt?
Yes. HMRC says some people may be exempt from MTD for Income Tax, including those who are digitally excluded. HMRC also says that if you think you qualify for an exemption, you should apply before you need to use the service. For digitally excluded people who would otherwise need to join from 6 April 2026, HMRC says they can apply now. HMRC’s exemption guidance explains this in more detail.
This is important because some people assume they can simply ignore MTD if they are not comfortable with software. HMRC’s position is not that broad. Exemption is possible in some cases, but it is something to apply for, not something to assume.
What should sole traders and landlords do now?
The practical answer is:
- check whether your 2024 to 2025 tax return puts you over the £50,000 qualifying income threshold
- confirm what counts towards qualifying income
- decide whether you will handle MTD yourself or through an accountant
- choose compatible software
- get signed up before the first filing cycle becomes a scramble
HMRC says people required to use MTD for Income Tax for 2026 to 2027 should sign up now, and that software should be chosen before signing up. HMRC’s sign-up guidance is explicit on that point.
The real risk is leaving it too late
The biggest mistake is not usually misunderstanding one technical rule. It is waiting until the new system is already live and then trying to sort out software, records, authorisations and reporting deadlines at the same time. HMRC’s guidance makes clear that there are several setup steps before you start using the system properly, including checking whether you are in scope, getting software, signing up, and authorising the software.
At Merranti, we help sole traders and landlords work out whether MTD for Income Tax applies, what software setup makes sense, and how to get the record-keeping and reporting side right before deadlines become a problem. If you think April 2026 might apply to you, it is worth checking now rather than after the first quarter has already started.
