Making Tax Digital (MTD) is finally becoming a reality for sole traders and landlords.
If your combined gross qualifying income from self-employment and property was more than £50,000 in 2024/25, you normally needed to start using MTD from 6 April 2026. This means quarterly updates as well as an annual tax return through compatible software, unless you are exempt.
If your qualifying income was more than £30,000 in 2025/26, you normally need to join from 6 April 2027 if you have not already joined.
For a full breakdown of what the MTD rules mean in practice, see our guide to Making Tax Digital for the self-employed.
Getting prepared for MTD isn’t something to overly panic about, but it’s also something you shouldn’t ignore.
You’ll need to use digital accounting software, keep accurate records, and get used to the new reporting method.
We recently reported how most self-employed people still aren’t ready for MTD. But even if the new rules don’t apply to you now, it’s worth getting used to MTD while there is no immediate pressure.
Will MTD ITSA apply to you?
Your MTD start date depends on your total gross qualifying income from self-employment and property for the relevant reference tax year. The first wave, from 6 April 2026, is based on qualifying income over £50,000 in 2024/25. This includes:
- Sole trader income
- UK or overseas rental income
- Furnished holiday lettings
If your qualifying income was more than £30,000 in 2025/26, you normally need to use MTD from 6 April 2027 if you have not already joined.
If you are below those entry thresholds, check the next stage: qualifying income over £20,000 in 2026/27 normally brings you into MTD from 6 April 2028. Exemptions may apply.
However, the government has confirmed that it plans to extend the scheme to those with qualifying income over £20,000 in 2026/27 from 6 April 2028 and to bring more taxpayers into the system over time. You can read the full guidance on GOV.UK.
What information do you have to submit?
Instead of filing one Self Assessment return by the end of January each year, you’ll be reporting throughout the year using MTD-approved software. You’ll need to submit:
- Quarterly updates showing your income and expenses
- Annual tax return through compatible software – to finalise your figures and report your other taxable income, gains and claims
Each type of income (trading and property) needs to be reported separately. So if you’re a sole trader and a landlord, you’ll have to keep two sets of digital records and file two sets of reports.
What are the quarterly deadlines?
Under the default system, quarterly updates must be submitted cumulatively, covering all of your business activity from the start of the tax year up to each quarter’s end.
These are the deadlines:
| Quarter | Period covered | Filing deadline |
|---|---|---|
| Q1 | 6 April to 5 July | 7 August |
| Q2 | 6 April to 5 October | 7 November |
| Q3 | 6 April to 5 January | 7 February |
| Q4 | 6 April to 5 April | 7 May |
If you prefer, you can apply to use calendar-quarter reporting, which uses standard quarters (e.g., 1 April to 30 June). The same 7th-of-the-month deadlines still apply.
How to prepare for MTD ITSA
The first wave of MTD began on 6 April 2026. If you were required to join but have not done so, take action now.
Later entrants should have their records and software ready before the start of the tax year in which they must join.
Here’s what you can do now:
- Choose MTD-compliant software. Tools like Xero and QuickBooks are already set up to handle MTD.
- Start digital recordkeeping early. If you’re not joining MTD right away, use the coming year as a trial run. Keep receipts, mileage, income, and expenses in software rather than on paper or in spreadsheets.
- Improve your bookkeeping habits. If you only update your records once a year, that will have to change. Under the new MTD rules, you will need to keep your records up to date regularly.
- Talk to your accountant. If you use one, find out how they’ll manage your MTD submissions and whether their fees will change. If you don’t use an accountant, consider whether now’s the time to get one.
- Plan for multiple income sources. If you’re both a landlord and a trader, you’ll need to keep records and file separately for each stream.
What if you don’t comply with MTD?
HMRC is introducing a new points-based penalty system for MTD ITSA. If you miss a deadline, you get a penalty point. Once you reach a certain number of points, you’ll be fined.
These points reset after a period of good behaviour, but it’s better not to get them in the first place.
It’s worth noting that HMRC has confirmed a soft landing for the first year: penalty points will not be issued for late quarterly updates during 2026/27, giving new MTD users time to adjust.
However, financial penalties for late Final Declarations and inaccuracies still apply from day one.
Late submissions, missing records, or filing outside the software could all result in penalties.
Get ready in advance
The most effective way to prepare for Making Tax Digital is to put the right systems in place before you are required to comply.
If you are already using cloud accounting software with a live bank feed, much of the groundwork is done.
The main adjustment is to your routine: keeping your records up to date, reconciling bank transactions within your accounting software, and meeting the quarterly deadlines.
The earlier you prepare, whether for April 2026 or a later entry point, the less disruption you are likely to face.