Making Tax Digital
Making Tax Digital for Income Tax (MTD) – 2026 Guide for Sole Traders & Landlords
Making Tax Digital for Income Tax (MTD) is changing how sole traders and landlords report their tax from April 2026.
If your income from self-employment or property exceeds £50,000, you’ll need to keep digital records and submit quarterly updates to HMRC using compatible software.
While the changes can feel complex, the aim is simple: to make your tax more accurate, more up to date, and easier to manage throughout the year.
What is MTD for Income Tax and who is affected?
MTD for Income Tax is the next step in the MTD timeline. It is a new way to report income from self-employment and property to HMRC and will be introduced in phases starting in April 2026.
From April 2026 if you have qualifying income of over £50,000 annually, you'll need to use MTD compatible software and make a quarterly submission to HMRC.
Your qualifying income can be from self-employment (not partnerships), rental or both. HMRC will look at your gross income (or ‘turnover’) from the year before. So, if you submitted a tax return for tax year 2024 to 2025, they’ll use this to work out your qualifying income for the 2026 to 2027 tax year.
What if my gross income is below £50,000?
HMRC have announced that from April 2027 MTD for Income Tax will be mandated for self-employed businesses and landlords with business turnover above £30,000.
What you need to do
To comply with Making Tax Digital, you will need to:
- Keep digital records of your income and expenses
- Use HMRC approved software
- Submit quarterly updates to HMRC
- Complete a final year-end declaration.
Key MTD Dates
April 2026: applies to income over £50,000
August 2026: first quarterly submission deadline
April 2027: threshold drops to £30,000
Future: extends to £20,000.
How we help
We support clients with:
Setting up MTD compliant software (Xero, QuickBooks)
We help you choose the right software for your needs and get everything set up correctly, so you’re compliant from day one and your financial data is organised and accessible.
Migrating from spreadsheets
If you’re currently using spreadsheets or paper records, we’ll guide you through a smooth transition to digital systems - minimising disruption and ensuring nothing is lost along the way.
Managing quarterly submissions
We take care of the ongoing reporting requirements, preparing and submitting your quarterly updates to HMRC accurately and on time, so you don’t need to worry about deadlines or penalties.
Ongoing bookkeeping and reporting
Beyond compliance, we provide regular bookkeeping support and clear financial reporting - giving you better visibility over your business and helping you make more informed decisions throughout the year.
How will MTD for Income Tax help you?
These changes will help to:
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Ensure you have accurate information to help with business planning and to support business productivity
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Saves time by keeping financial admin all in one place and helps automate repetitive tasks
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Store your information safely and securely through two factor authentication (2FA) and data encryption
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Collaborate with us easily, as your accountant, through software that allows you to share information instantly.
At Charlton Baker, we're here to help and guide you through this process. We're available to discuss what this means for you moving forwards and to support you to make the transition into MTD as smooth as possible.
Making Tax Digital FAQs
1. Do I need to register for Making Tax Digital?
If you’re a sole trader or landlord, you’ll need to use Making Tax Digital for Income Tax from April 2026 if your combined income from self-employment and property is over £50,000.
This threshold will reduce to £30,000 from April 2027, with further expansion expected in future years.
If you’re unsure whether MTD applies to you, it’s worth checking now - many people will be brought into the system over the next few years.
2. What happens if I don’t comply with MTD?
If you don’t comply with Making Tax Digital requirements, HMRC may apply penalties for late submissions or errors.
Under the new system, penalties are based on a points system. If you miss submission deadlines, points accumulate and can result in financial penalties.
The simplest way to avoid this is to:
Keep your records up to date
Use compliant software
Submit your updates on time
3. Can I still use spreadsheets for MTD?
You can still use spreadsheets, but only if they are linked to compatible MTD software that can submit your data directly to HMRC.
In practice, most individuals and businesses find it easier to use cloud accounting software such as Xero or QuickBooks, which:
Keeps records digitally
Automates submissions
Reduces the risk of errors
4. What software do I need for Making Tax Digital?
To comply with MTD, you’ll need to use HMRC recognised software.
This software allows you to:
Keep digital records of income and expenses
Submit quarterly updates to HMRC
Complete your year-end declaration
Popular options include Xero, QuickBooks and FreeAgent.
5. What are the key deadlines for Making Tax Digital?
Making Tax Digital introduces quarterly reporting instead of a single annual return.
Key dates to be aware of:
April 2026 → MTD starts for income over £50,000
Quarterly submissions → every 3 months
First deadline → August 2026
Final declaration → 31 January each year
These quarterly updates replace the traditional once-a-year Self Assessment approach.
6. What do I actually need to do for MTD?
To comply with Making Tax Digital, you’ll need to:
Keep digital records of your income and expenses
Use HMRC compatible software
Submit quarterly updates to HMRC
Complete a final declaration each year
The key change is frequency - you’ll move from one annual submission to regular updates throughout the year.
7. Does Making Tax Digital apply to landlords?
Yes. Making Tax Digital applies to landlords as well as sole traders.
If your rental income, combined with any self-employment income, exceeds the relevant threshold (£50,000 from April 2026), you will need to:
Keep digital records
Submit quarterly updates
Use compatible software
8. Will I need to pay tax four times a year?
No - your tax payment dates don’t change.
Even though you’ll submit quarterly updates, you’ll still:
Pay your tax by 31 January (and payments on account where applicable)
The quarterly updates are simply a way of keeping HMRC informed throughout the year, not paying tax more often.
9. How will Making Tax Digital affect my business?
Making Tax Digital changes how you manage and report your finances.
While there is more regular reporting, many clients benefit from:
Better visibility over their tax position
More accurate records
Fewer surprises at year end
With the right systems in place, it can actually make running your finances easier.
10. How can Charlton Baker help with MTD?
We support you through the full transition to Making Tax Digital, including:
Setting up MTD-compliant software
Moving from spreadsheets to digital systems
Managing quarterly submissions
Providing ongoing support and advice
Our aim is simple - to make the process as smooth and stress-free as possible, so you can focus on running your business.
We are always here to talk
