Making Tax Digital sounds like one of those things you can safely ignore until someone shouts about it. It is not, but it is also nowhere near as scary as the panic online suggests.
If you are a sole trader or landlord, here is exactly what is changing, when it affects you, and the handful of things worth sorting now so it is a non-event when it lands.
Please note: tax rules change. The dates and thresholds below were correct at the time of writing, but always check the current position on GOV.UK or with us before acting.
What is Making Tax Digital, in one paragraph
Making Tax Digital for Income Tax (often shortened to MTD for Income Tax, or MTD for ITSA) changes how sole traders and landlords report income to HMRC. Instead of one annual Self Assessment return, you keep digital records and send HMRC a short update every quarter using compatible software, followed by a final declaration at the end of the year. It does not change how much tax you pay. It changes how and when you report it.
Who is affected, and from when
It is being rolled out in phases, based on your gross income from self-employment and property combined. The key dates are:
- From 6 April 2026: sole traders and landlords with gross income over £50,000.
- From April 2027: the threshold drops to £30,000.
- From April 2028: it drops again to £20,000.
Two important details that catch people out. First, it is based on gross income, not profit. That is your total income before any expenses are deducted. If you turn over £55,000 but only make £30,000 profit, you are still in scope from April 2026. Second, self-employment and property income are combined. A sole trader earning £32,000 who also receives £20,000 in rent has £52,000 of qualifying income, which puts them over the April 2026 threshold.
HMRC uses your 2024/25 tax return to work out your start date for April 2026.
What actually changes day to day
The headline change is the move from one annual return to a more regular rhythm:
- Digital records. You will need to keep your records digitally, using software that works with MTD. Paper ledgers and a shoebox of receipts will not cut it.
- Quarterly updates. Four times a year you send HMRC a summary of your income and expenses. These are light-touch summaries, not full tax calculations.
- A final declaration. At year end, a final declaration replaces the old Self Assessment return and pulls together everything from your quarterly updates.
There is also a new points-based penalty system for late submissions, so getting into a steady routine matters.
What to do now
If you are in scope from April 2026, do not wait. The businesses that find this painless are the ones that sort their setup early. In practice that means:
- Check whether you are actually in scope, based on combined gross income, not profit.
- Get on MTD-compatible software and, ideally, start using it before you have to, so it is second nature by the time it is mandatory.
- Get your record-keeping digital now, rather than scrambling in the first quarter.
- Talk to your accountant about how the quarterly rhythm will work for your specific situation.
The myths, addressed plainly
“I will be paying tax four times a year.” No. The quarterly updates are summaries, not payments. Your tax payment dates are not changing in the same way.
“This means a bigger tax bill.” No. MTD changes how you report, not how much you owe.
“It is years away.” For the over-£50,000 group, it is already live as of April 2026. And the thresholds keep dropping, so even if you are not in scope yet, you very likely will be.
The bottom line
Making Tax Digital is a change in admin, not a change in what you owe. Handled late, it is a stressful scramble. Handled early, it is genuinely a non-event, and arguably better than the old once-a-year panic, because your records stay current all year round.Want MTD sorted without the headache? We will get you set up, on the right software, and into a routine that takes minutes a quarter. Get in touch and we will make it painless.
