Making Tax Digital for Income Tax: A Practical Guide for Sole Traders and Landlords
Making Tax Digital for Income Tax is now in place for some sole traders and landlords.
If your qualifying income is over £50,000, you should have started using Making Tax Digital from 6 April 2026.
If you’re not sure whether it applies to you, whether you should already be registered, or what you actually need to do each quarter, this guide takes you through it.
And if you would rather talk it through with somebody, give us a call. We’d much rather you ask than spend hours trying to work it all out yourself.
What is Making Tax Digital for Income Tax?
Making Tax Digital, usually shortened to MTD, changes the way some sole traders and landlords keep their financial records and report information to HMRC.
Instead of sorting everything out once a year for your Self Assessment, you need to keep digital records throughout the year and send quarterly updates to HMRC using compatible accounting software.
You will still complete your tax return at the end of the year and pay any tax due by the usual deadline. MTD changes how you keep and submit your information. It does not change how your tax is calculated.
Who needs to use Making Tax Digital?
MTD for Income Tax is being introduced gradually.
From 6 April 2026, you need to use Making Tax Digital if you are a sole trader or landlord and your total qualifying income was over £50,000 in the 2024/25 tax year.
From 6 April 2027, the threshold reduces to over £30,000, based on qualifying income in the 2025/26 tax year.
From 6 April 2028, the threshold reduces again to over £20,000, based on qualifying income in the 2026/27 tax year.
HMRC will normally contact you if they believe you need to use MTD, but it is still your responsibility to check whether the rules apply to you.
What does ‘qualifying income’ mean?
This is one of the bits that can cause confusion.
Your qualifying income is your gross income from self-employment and property before expenses are deducted.
It is not your profit.
For example, if your business took £42,000 during the year and you also received £12,000 in rental income, your combined qualifying income would be £54,000.
That means you could fall within the MTD rules even though neither source of income is over £50,000 on its own.
What do I need to do under Making Tax Digital?
There are three main things you need to get right.
Keep digital records
You need to keep records of your business or property income and expenses digitally.
For most people, that means using accounting software such as Xero rather than keeping everything in a bag of receipts and trying to sort it out at the end of the year.
It also means getting into the habit of updating your records regularly.
Send quarterly updates to HMRC
You need to send HMRC a summary of your income and expenses every three months through MTD-compatible software. For most people, the standard quarterly periods and deadlines are:
6 April to 5 July - submit by 7 August
6 July to 5 October - submit by 7 November
6 October to 5 January - submit by 7 February
6 January to 5 April - submit by 7 May
These are updates of the information held in your digital records.
They are not four separate tax returns and you do not pay your Income Tax four times a year simply because you are submitting quarterly information.
Complete your tax return
At the end of the tax year, you still need to complete your tax return using compatible software. This brings together your final figures along with any other information that needs to be included on your return.
Your tax payment deadline remains 31 January following the end of the tax year.
Making Tax Digital is already live. What if I haven’t sorted it yet?
If your qualifying income meant you should have started using MTD from April 2026 and you have not registered or submitted your first update, deal with it now rather than putting it off.
The first quarterly update deadline was 7 August 2026.
HMRC has confirmed that it will not apply penalty points for late quarterly updates during the first MTD tax year, 2026/27. That does not mean the deadlines can simply be ignored, and the normal rules around late tax returns and late tax payments still apply.
If you think you should already be using MTD, give us a call. We can check where you are up to and help you get everything in place.
What software do I need for Making Tax Digital?
You need software that is compatible with Making Tax Digital for Income Tax. At AFor Accounting, we work with Xero and can help you get everything set up properly.
Using accounting software can also make the day-to-day side of running your business easier. You can keep your income and expenses up to date, upload receipts, raise invoices and see what is happening with your finances without waiting until the end of the year.
If technology really is not your thing, you do not have to work it all out alone. We can show you what you need to do and help you find a way of working that suits you.
Do I still need an accountant if I use accounting software?
Accounting software does a lot of useful things, but it cannot look at your circumstances, spot something that does not look quite right or talk through a decision with you.
We can help make sure the information going into the software is correct, deal with your submissions and make sure you understand what the figures are actually telling you.
Can AFor Accounting submit my quarterly updates for me?
Yes. We can support you with as much or as little of Making Tax Digital as you need. That might include:
checking whether MTD applies to you
getting you registered
setting up Xero
helping you move your records across
showing you how to keep your records up to date
checking your bookkeeping
submitting your quarterly updates
completing your tax return
answering the questions that inevitably crop up along the way
You will still need to keep accurate records and send us the information we need, but you do not have to deal with HMRC and the reporting side of it by yourself.
Got more questions about Making Tax Digital?
From what software you need to what happens if your income drops below the threshold, we’ve answered some of the questions we’re asked most often.
Read our Making Tax Digital FAQs