April 2026: Mandatory Switch to Making Tax Digital (MTD) for Sole Traders and Landlords

From 6 April 2026, a major change is coming for many UK Sole Traders and Landlords: Making Tax Digital for Income Tax (often called “MTD for Income Tax” or “MTD ITSA”) is becoming mandatory.

It changes how and when you’ll need to keep your accounting information—moving away from the familiar habit of gathering everything at year end to “do the accounts”, and towards a requirement to keep your records up to date throughout the year.

And that’s the big takeaway: MTD makes year-round bookkeeping non-negotiable. If you try to keep doing things the old way, the new system will feel stressful, rushed, and easy to get wrong. But if you build simple monthly habits (or have someone do it for you), MTD can be handled smoothly — much like the routine compliance most small limited companies already manage.

In our earlier article: “How Does Making Tax Digital for Income Tax Work?”, we explained that the practical success factor is not the tech—it’s the discipline of keeping records current, so your quarterly submissions reflect reality rather than guesswork. This article builds on that, using HMRC guidance to clarify:

• Who is Impacted (and When)?
• What Actually Changes?
• What Stays the Same?
• What You Should Do Now?

1) Who is Impacted (and When)?

The headline rule: qualifying income over £50,000 (from self-employment and/or property)

MTD for Income Tax becomes mandatory from 6 April 2026 if your INCOME (not profit) is over £50,000.

Even though the focus here is April 2026, it’s worth understanding the staged implementation:

• From 6 April 2026: mandatory if qualifying income over £50,000 (based on the 2024/25 tax year).
• From 6 April 2027: mandatory if qualifying income over £30,000 (based on the 2025/26 tax year).
• From 6 April 2028: HMRC policy publication describes plans to bring in those with qualifying income over £20,000 (based on 2026/27).

So even if you’re not mandated in April 2026, many sole traders and landlords will be pulled into MTD in the following 12–24 months.

If you have both self-employment income and rental income, you’re still one taxpayer, but you’ll typically have separate “income sources” to keep track of, and you may need to submit updates for EACH relevant source SEPARATELY. HMRC’s guidance emphasises digital records and reporting for self-employment and property income.

Likewise, if you have more than one trade, HMRC expects you to keep separate digital records and send SEPARATE quarterly updates for EACH. HMRC even uses an example (electrician and driving instructor) to make this explicit.

In plain English: two trades can mean two sets of records and two sets of quarterly submissions—unless you have a good system (and ideally professional support from Accountant) to keep everything organised.

2) What Actually Changes?

MTD for Income Tax is fundamentally a change to how you keep records and how you report to HMRC during the year.

Change #1: digital record keeping becomes the default expectation

Under MTD, you must keep digital records of your self-employment and/or property income and expenses using compatible software.

HMRC defines a digital record as “one created and stored in software that works with MTD for Income Tax”.

This is not “digital for the sake of it”. HMRC wants your figures to come from records that are kept continuously, rather than reconstructed months later from bank statements, memory, and a pile of receipts.

Change #2: quarterly updates to HMRC (instead of one annual touchpoint)

You will need to send quarterly updates to HMRC through compatible software.

Key points HMRC makes about quarterly updates:

• They are summary totals by category, not line-by-line transaction detail.
• You do not need to make accounting or tax adjustments before sending them.
• If you had no income/expenses in a period, you still need to submit an update to tell HMRC.
• Corrections can be made through later updates; HMRC notes this reduces the need to resend prior updates.

This is where the “keep records up to date” message becomes real. Quarterly updates are only as good as the digital records behind them.  If you wait until after the tax year ends, then your quarterly submissions are likely inaccurate or incomplete, and you’ll have to do all bookkeeping plus multiple missed updates in a short, painful window.

That’s exactly the scenario MTD is designed to stop.

Change #3: you’ll need compatible software (and it’s not optional)

MTD reporting must be done through commercial software that works with MTD for Income Tax (or an agent using such software on your behalf).  And this means taking out a subscription to HMRC approved accounting software.  We current support both Xero and FreeAgent (both of which are compliant) for the benefit of our clients.

HMRC’s software guidance spells out what the software must do:

• Create, store, and correct digital records of self-employment / property income and expenses
• Send quarterly updates to HMRC
• Submit the tax return by 31 January following the tax year.

HMRC also notes you only need to create digital records for self-employment and property income/expenses, but the software must still be able to include other income sources in the tax return (for example, dividends, savings interest, pensions, etc.).

So even if only part of your financial life is “MTD-recorded”, the annual return still needs to pull everything together.

Change #4: penalties and compliance become more “process-driven”

MTD introduces more frequent obligations, so penalty rules matter. HMRC have indicated that they may not apply penalty points for late quarterly updates for the first year.

However, it is definitely not recommended to take advantage of this, as it demonstrates a record of non-compliance for your business, and once this “soft landing” period ends, missed submissions will create ongoing compliance issues and unnecessary stress going forward.

3) What Stays the Same?

A lot of confusion around MTD comes from the fear that “everything is changing”. In reality, many fundamentals remain the same—especially around tax calculation and the timing of you payments of tax.

The Tax Year and Self-Assessment Framework Remain the Same

MTD for Income Tax is not the end of Income Tax Self-Assessment.  It is just a new way to report information during the year to HMRC more frequently. HMRC are clear that you still need to submit a self-assessment tax return by 31 January following each tax year.

Payment Deadlines (For Most People) Do Not Change

Our earlier article explained this clearly: “quarterly submissions do not mean quarterly tax payments (at least under current rules). You still generally pay Income Tax through the familiar Self-Assessment timetable, including payments on account where applicable.”

Allowable Expenses and Tax Rules Remain the Same

MTD also does not change what you can claim as allowable business expenses.

So, if you already understand the expense rules for your trade (or you rely on an accountant for that), those principles remain. What changes is how regularly you must capture and submit the underlying data.

You Can Still Use an Accountant (And Realistically This Becomes More Important!)

MTD does not force you to do everything yourself. HMRC repeatedly acknowledges that you can have an agent act for you, including using software on your behalf.

The bigger question is not “can I use an accountant?” but “what’s the most efficient way to stay compliant without losing focus on my core business?”

And for many sole traders and landlords, the answer will increasingly look like what small limited companies already do: Ongoing Bookkeeping Support + Quarterly Check-Ins + Year-End Finalisation.

4) What You Should Do Now?

If you are mandated from April 2026, the best time to prepare is before you’re forced into the new rhythm.

Here’s a sensible, low-stress approach:

Start Acting Like You’re Already in MTD (By Performing Monthly Bookkeeping)

Even if you’re not mandated yet, begin the habit:

• Reconcile bank transactions monthly,
• File receipts digitally,
• Keep income categorised properly.

This does two things:

• it reduces the “MTD shock” when quarterly reporting begins, and
• it gives you far better visibility over cashflow and profitability.

Choose Your Operating Model: DIY vs Supported vs Fully Outsourced

MTD is manageable DIY if you are consistent.

But most business owners don’t struggle because they’re incapable—they struggle because:

• They’re busy doing the work that earns the money, and
• Admin gets postponed until it becomes urgent.

That’s why MTD increases the value of an accountant. When the compliance burden becomes quarterly (plus year-end), many sole traders and landlords will find it cheaper—in time, stress, and mistakes—to have an accountant to:

• Keep bookkeeping current,
• Produce the quarterly submissions,
• Review for obvious errors, and
• Handle the year-end finalisation.

Get Your Records “MTD-ready” Before April 2026

That means:

• Consistent categories aligned to Self-Assessment (so your software produces the right totals),
• Separating business and personal spending as much as possible (or at least having a clean method to identify business items),
• Ensuring you can evidence income and expenses (digitally stored receipts/invoices, bank feeds, etc.).

Don’t Confuse Quarterly Updates with Final Tax Numbers

Quarterly updates are not the final say. HMRC explicitly says you don’t need to make accounting or tax adjustments before sending them.

But if your records are messy, your quarterly updates will be messy too—and you’ll spend the year constantly “catching up”.

5) Why Hiring An Accountant Has Never Been More Important

Historically, many sole traders and landlords treated accounting like an annual event:

• Gather documents,
• Do a tax return,
• Move on.

MTD makes that approach increasingly risky, because the system is built around ongoing record keeping and quarterly reporting.

This is exactly why the limited company world has long relied on continuous accounting support for: regular bookkeeping, quarterly VAT (where relevant), payroll, and year-end accounts.

MTD for Income Tax simply effectively nudges many sole traders and landlords into a similar cadence.

An accountant adds value under MTD in very practical ways:

• Setup Done Correctly: Right software, right structure for multiple income sources.
• Records Kept Current: So quarterly updates are straightforward, not panicked.
• Tax-smart bookkeeping: capturing expenses properly (and spotting things you might miss).
• Quarterly Rhythm Without Disruption: Compliance happens in the background while you focus on clients, tenants, or projects.
• Year-End Becomes a Review: Not a rescue mission.

If your time is best spent earning money—not wrestling with categorisation rules, missing receipts, and software workflows—then MTD is a clear signal to get support.

Can QAccounting Help Me?

Yes, we aim to be the UK’s Premier Online Accountancy and Tax Accountant, and we are here to help you every step of the way, whether you need to understand the rules in greater detail or need advice about next best steps.

Please give us a call (0116 243 7868), email us, or contact us ONLINE to speak to a member of our Accounting team without delay!

Author: George Ian Hope BAcc(Hons), MSc(IT), FCCA, CGA, CPA

Managing Director – QAccounting Limited (www.qaccounting.com )

https://www.linkedin.com/in/gihope

Ian is a general practicing member of the Association of Chartered Certified Accountants with fellowship status (FCCA). He is also a member of the Certified General Accountants Association of Canada (CGA), and a member of Chartered Professional Accountants of Canada (CPA).

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