23/02/2026
** Making tax digital for Soletraders & Landlords with qualifying income of £50,000 or more **
What is Making Tax Digital for Income Tax?
This guide breaks down MTD for Income Tax: who it's for, when the changes start, and what the new rules will mean for you.
If you’re a sole trader or a landlord, you might have heard about Making Tax Digital for Income Tax (MTD for short).
It’s a new initiative from the government that changes how you report income and expenses to HMRC. It will affect sole traders and landlords with income over the qualifying thresholds (more on those later). Because it’s the law, you’ve got to do it — unless you think you might be exempt.
This guide covers the MTD basics, how the new rules affect you, and how to get ready in good time. Before we get into it, a reminder that we can’t give you tax or financial advice. You’ll need to speak to a professional adviser for that.
Why it’s happening
HMRC introduced Making Tax Digital for VAT back in 2019. Now it’s the turn of income tax.
The idea is that doing everything digitally will help you stay on top of your taxes year-round, reduce the likelihood of mistakes and whittle down the admin.
And because you’ll update HMRC more often, you’ll get a better estimate of your tax and National Insurance liabilities. So you have a clearer picture of your cash flow and how much to set aside for your tax bill.
For HMRC, it’ll help them make sure everyone pays the right amount of tax.
Who needs to get ready for MTD?
MTD will affect around 2.65 million sole traders and landlords across the UK. But not all at once. HMRC are rolling out the new initiative in phases, starting with higher earners.
It’s all based on your gross income – also known as ‘qualifying income’. That’s everything that comes in from self-employment and property, before anything goes out (e.g. expenses and taxes).
Here are the different phases by gross income.
Over £50,000 of qualifying income, start to use MTD from 6 April 2026.
Over £30,000 of qualifying income, start to use MTD from April 2027.
Over £20,000 of qualifying income, start to use MTD from April 2028.
These timings are designed so that by the income tax return deadline of 31 January, you (and HMRC, if you submit on time) should be able to work out whether MTD applies from 6 April of the same year.
What counts as qualifying income?
Qualifying income is gross income (income before any expenses or taxes) of sole traders and landlords. If you have more than one trade or rental business, you need to add them up. PAYE Income as an employee is not included.
If you start trading part way through the year, you’ll need to increase the amount of income to take into account. For example, if you only traded for 6 months of the year, your qualifying income will be twice what you actually made.
Here are some examples of how MTD might affect different types of businesses.
What’s changing?
Instead of filing one annual tax return, sole traders and landlords who are part of MTD must:
Keep up-to-date digital records of their income and expenses
Use HMRC-approved software to send quarterly updates of their records to HMRC
Submit a final declaration to confirm their figures for the whole year, along with details of other income
This process will replace the traditional single yearly Self Assessment tax return done through the HMRC website.
Timeline for MTD
Here’s a quick look at how the new process will work once you're using MTD.
Quarterly updates: you’ll send an update of your income and expenses to HMRC every three months, using your chosen software. These updates are due by 7 August, November, February, and May.
End of year statement: once the tax year ends on April 5, you’ll have until the following January 31 to send a final report that confirms your yearly earnings and expenses. This will include details of other taxable income not reported under MTD (e.g. capital gains or PAYE income).
Payments: you'll still pay your tax liabilities as you do now.
