Making Tax Digital (MTD) is transforming the way sole traders and landlords report income to HMRC. With phased start dates from April 2026 through to April 2028, it’s essential to understand what the changes mean for you.
At Hall Morrice, we are committed to helping our clients prepare early, remain compliant and use digital systems to gain better financial clarity while also meeting regulatory requirements.
Making Tax Digital (MTD) is a government initiative introduced by HM Revenue & Customs to modernise the UK tax system. Under MTD for Income Tax Self Assessment (MTD ITSA), sole traders and landlords must:
MTD started with VAT and is now being extended to income tax reporting.
The MTD start date depends on your level of qualifying income:
If your total income from self-employment and property exceeds these thresholds, you must comply from the relevant date. There is currently no confirmed date for MTD to apply to partnerships.
Landlords are included within the same phased introduction as for sole traders. If you jointly own property, you must include your share of the rental income when calculating your threshold.
The thresholds apply to your total qualifying income, which includes:
HMRC will assess your obligation based on your tax return from the previous tax year.
For example, if your 2024/25 tax return shows qualifying income over £50,000, you must comply from 6 April 2026. You do not need to receive a notification from HMRC for the obligation to apply.
Under Making Tax Digital for Income Tax, you must submit:
You must report totals of income and expenses every quarter. Standard quarterly deadlines:
This includes accounting adjustments such as capital allowances.
This confirms all income sources and finalises your tax position.
In total, you could submit up to five reports per business each year.
Under MTD rules, you must keep digital records of:
If your turnover is below the VAT registration threshold, simplified “three-line accounting” may be available. Please note that paper-based systems will no longer be compliant once you fall within MTD.
You must use MTD-compatible commercial software. Options include:
HMRC does not provide free filing software for most businesses. At Hall Morrice, we can recommend, implement and manage suitable digital solutions tailored to your business.
Yes. Sole traders and landlords can voluntarily join the MTD ITSA pilot before their mandatory start date. Benefits of early sign-up include:
You must use compliant software and accept the points-based penalty system when joining early.
You may qualify for exemption if you are:
Individuals exempt from MTD for VAT are automatically exempt from MTD for Income Tax. Applications should be made before your MTD start date. HMRC aims to respond within 28 days.
MTD for Income Tax uses a points-based penalty system. Each late submission earns a penalty point and once the threshold is reached, a £200 fine applies. However, additional late submissions result in further £200 penalties.
There will be no penalties for late quarterly updates during 2026/27 to allow businesses time to adjust.
No. MTD does not currently apply to corporation tax. However, from April 2026, companies must use commercial software to file corporation tax returns as HMRC’s current online service will close.
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As the largest independent accounting firm in the North East of Scotland, we combine trusted expertise with fresh, innovative thinking. Our approach to Making Tax Digital includes clear guidance, practical implementation, ongoing strategic advice and proactive, relationship-led service. Our experienced tax team can help you feel confident, informed and in control.
We’re offering a short readiness review to assess your income threshold, systems and reporting risk.
Speak to our tax team today → tax@hall-morrice.co.uk
