Making Tax Digital for Income Tax: What Sole Traders and Landlords Need to Do (2026/27)
Making Tax Digital for Income Tax: What Sole Traders and Landlords Need to Do (2026/27)
Making Tax Digital for Income Tax (MTD for Income Tax) became mandatory on 6 April 2026. If you are a sole trader or landlord and your self-employment and property income came to more than £50,000 on your 2024/25 tax return, you should already be keeping digital records and sending quarterly updates to HMRC. The threshold falls to £30,000 in April 2027 and £20,000 in April 2028.
Here is who is in, the 2026/27 deadlines, the new penalty points and what to do before the next quarterly deadline on 7 November 2026.
Try it yourself: MTD changes how you report, not how much tax you pay. The Self-Assessment Calculator estimates your 2026/27 Income Tax and Class 4 National Insurance.
Who has to use MTD for Income Tax, and when
You must use MTD if you are registered for Self Assessment, have self-employment or property income, and your qualifying income is over the threshold. HMRC looks at the return from two years earlier:
| Tax return HMRC checks | Qualifying income over | You must use MTD from |
|---|---|---|
| 2024/25 (filed by 31 January 2026) | £50,000 | 6 April 2026 |
| 2025/26 (due 31 January 2027) | £30,000 | 6 April 2027 |
| 2026/27 (due 31 January 2028) | £20,000 | 6 April 2028 |
HMRC writes to confirm your start date, but if no letter arrives it is still your responsibility to check. From September 2026 HMRC has started signing up people who should be using MTD for 2026/27, using details it already holds, which may be out of date, so signing up yourself is better. Partnerships are not yet required to join.
What counts as qualifying income
Qualifying income is your total self-employment and property income before expenses: turnover or gross rent, not profit. A landlord with £54,000 of rent and £38,000 of costs has a £16,000 profit but a qualifying income of £54,000, so is in from April 2026.
- Counts: sole trader turnover, UK property income, and foreign property income if you were UK resident.
- Does not count: your profit share as a partner, PAYE employment income, dividends (including from your own company) and pensions.
- Combined: self-employment and property income are added together, so two sources each under the threshold can still put you over it.
Three worked examples
| Person | Self-employment turnover | Gross rent | Qualifying income | MTD start |
|---|---|---|---|---|
| Priya, freelance designer and landlord | £36,000 | £16,500 | £52,500 | April 2026 (over £50,000 on 2024/25 return) |
| Tom, employee with one buy-to-let | £0 | £24,000 | £24,000 | April 2028, if 2026/27 rent is still over £20,000 |
| Sam, plumber | £34,000 | £0 | £34,000 | April 2027, if 2025/26 turnover is over £30,000 |
Tom's £70,000 salary is irrelevant: only his rent counts. Model rental profit separately with the Rental Property Calculator.
Joint property owners
If you own a rental property with someone else, only your share of the income counts towards your qualifying income. In HMRC's example, a property generating £50,000 a year owned equally by two siblings gives each a qualifying income of £25,000: below £50,000 and £30,000, but over the £20,000 threshold that applies from April 2028.
Record-keeping is also simpler for jointly let property:
- You only record your share of income and expenses, with no need to link to the other owner's records.
- One record per income category per update period, and one per expense category per tax year, is enough.
- You can leave joint expenses out of quarterly updates, as long as you add them before your tax return.
The 2026/27 deadlines
Quarterly updates are cumulative: each covers the start of the tax year to the end of the latest quarter, so a correction to your records simply flows into the next update.
| Update covers (standard periods) | Calendar periods alternative | Deadline |
|---|---|---|
| 6 April to 5 July 2026 | 1 April to 30 June 2026 | 7 August 2026 |
| 6 April to 5 October 2026 | 1 April to 30 September 2026 | 7 November 2026 |
| 6 April 2026 to 5 January 2027 | 1 April to 31 December 2026 | 7 February 2027 |
| 6 April 2026 to 5 April 2027 | 1 April 2026 to 31 March 2027 | 7 May 2027 |
| 2026/27 tax return | 31 January 2028 |
Calendar quarters must be chosen before your first update and cannot be changed later in the year. As of 19 October 2026, the next deadline is 7 November 2026. If you missed 7 August, send that update now.
You send a separate update for each self-employment. All UK properties form one UK property business with one update, and all foreign properties form another.
The tax return replaces the old annual return
You submit your tax return through MTD software by 31 January after the tax year. It must include all other taxable income and gains, such as savings interest and dividends. HMRC pre-fills some items, including PAYE income and pensions.
Payment dates do not change
Quarterly updates are reporting, not payment. You still pay by 31 January and 31 July, with payments on account unchanged. Our guide to Class 2 and Class 4 NI for 2026/27 explains how those payments are calculated.
Your 2025/26 return is still the old kind
Your 2025/26 return is still due on 31 January 2027 under the existing rules and penalties. The Self Assessment guide covers that process.
The new penalty points system
MTD users move to new penalties that replace the existing Self Assessment ones for their personal return.
Late submission. Each missed deadline earns one point, however many businesses you have. At 4 points you pay £200, and £200 for every later miss. Below the threshold, points expire after 24 months. At the threshold, you clear them by meeting every deadline for 12 months and sending anything outstanding from the previous 24 months.
Crucially, HMRC will not apply penalty points for late quarterly updates in 2026/27. Only a late tax return earns a point. From 2027/28, quarterly updates count too.
Late payment. Penalties apply to balancing payments and amounts due after amendments, not to payments on account. On HMRC's published rates for 2026/27:
| How late | Penalty |
|---|---|
| Up to 15 days | None |
| 16 to 30 days | 3% of tax owed at day 15 (none in your first year) |
| 31 days or more | 3% at day 15 plus 3% at day 30, plus a penalty at 10% a year on the outstanding amount from day 31 |
Your first year gets a one-off 30-day window to pay or agree a payment plan. From 2027/28 the percentage charges rise to 4%. Interest runs on top, as now.
Illustration: a £6,000 balancing payment 60 days late would attract 3% + 3% = £360, plus 10% a year for the 30 days from day 31 (about £49), roughly £409 before interest. An agreed payment plan pauses penalties from the date you contacted HMRC, if you keep to it.
Exemptions
Automatic exemptions include qualifying income of £20,000 or less, having no National Insurance number before the tax year started, and acting as a personal representative. For 2026/27 only, people whose 2024/25 return included averaging relief, qualifying care relief or the SA109 residence pages are also exempt. Married Couple's Allowance and Blind Person's Allowance claimants (on the 2024/25 return) are exempt beyond April 2027.
You can apply if you are digitally excluded, for example because age, health or disability stops you using a computer or smartphone, religious beliefs are incompatible with digital records, or you have no suitable internet access. HMRC will not accept unfamiliarity with software, past paper filing, or extra time and cost. Exempt people still file an ordinary Self Assessment return.
Choosing compatible software
HMRC does not recommend products but publishes a list of recognised software and a finder tool. Your software must cover every income source and fit your accounting period. Free products exist for simple affairs, often with transaction limits.
Spreadsheets are allowed only with bridging software digitally linked to them; copying and pasting records that have been sent is not. Each record needs a date, amount and category. VAT-registered? Check one package handles both MTD for VAT and Income Tax, and use the VAT Calculator for the VAT side.
Your MTD checklist for October 2026
- Check your status with HMRC's eligibility tool, using gross figures from your 2024/25 and 2025/26 returns.
- Sign up using your Self Assessment login if you have not already.
- Choose software that covers every self-employment and property business you have.
- Bring records up to date from 6 April 2026 (or 1 April for calendar periods).
- Send any missed 7 August update, then the 7 November update.
- Diarise 7 February 2027, 7 May 2027 and 31 January 2028.
- File your 2025/26 return by 31 January 2027 the old way.
- Estimate your bill with the Self-Assessment Calculator so 31 January holds no surprises.
The Autumn Budget on 28 October 2026 could change parts of these rules, so check the latest HMRC guidance before acting.
Frequently asked questions
Does MTD change how much tax I pay? No, only how you keep records and report. A sole trader with £30,000 of profit in 2026/27 (outside Scotland) pays Income Tax of £3,486 (20% on £17,430 above the £12,570 Personal Allowance) and Class 4 NI of £1,045.80 (6% on the same £17,430), whether or not they use MTD. Check your own figures with the Income Tax Calculator.
I joined late and missed the August update. Will I be fined? Not with a penalty point: HMRC is not applying points for late quarterly updates in 2026/27. You must still send the update and keep digital records.
I own a rental property with my spouse. Is the threshold per couple? No. Each owner counts only their own share of the income.
The bottom line
If your gross self-employment and property income was over £50,000 on your 2024/25 return, MTD already applies and your next update is due on 7 November 2026. Over £30,000 on your 2025/26 return means you join on 6 April 2027. Use this year, with no points for late updates, to get your records working. Weighing up a company instead? The Limited Company vs Sole Trader Calculator compares the two, and landlords can test deals with the Buy-to-Let Calculator.
Related calculators and guides
- Self-Assessment Calculator, your 2026/27 tax and NI
- Income Tax Calculator, your tax band
- Rental Property Calculator, rental profit
- Buy-to-Let Calculator, buy-to-let returns
- Limited Company vs Sole Trader Calculator, business structures
- VAT Calculator, VAT sums
- Self Assessment guide, the annual return
- Class 2 and Class 4 NI in 2026/27, the self-employed bill
This article is for general guidance only and is not personalised tax advice. Tax rules are complex and your circumstances may differ. For advice tailored to your situation, speak to a qualified accountant or tax adviser. Figures are for the 2026/27 tax year and sourced from gov.uk.
Sources
Rates and rules in this article are taken from the official pages below. Figures were checked against these sources at the last review date shown above; always confirm against the source before acting.
- GOV.UK: Check if you're eligible for Making Tax Digital for Income Tax
- GOV.UK: Work out your qualifying income for Making Tax Digital for Income Tax
- GOV.UK: Send quarterly updates
- GOV.UK: Create digital records
- GOV.UK: Submit your tax return
- GOV.UK: Penalties for Making Tax Digital for Income Tax
- GOV.UK: Find out if you can get an exemption from Making Tax Digital for Income Tax
- GOV.UK: Find software that's compatible with Making Tax Digital for Income Tax
- GOV.UK: Sign up for Making Tax Digital for Income Tax
- GOV.UK: Self-employed National Insurance rates
- HMRC: Income Tax rates and Personal Allowances
About the author
Alexandre Bernier, LLM (UK), CFP®, CIM®, PFP®. Financial planner with 18 years in banking and wealth management, holding a UK master of laws and the Canadian CFP®, CIM® and PFP® designations. Writes and reviews every calculator and article on FinanceToolz.
Rates and thresholds in this article are taken from HMRC and GOV.UK. See our editorial policy for how content is sourced, reviewed and corrected. This is general information, not regulated financial advice.