Making Tax Digital for Income Tax (MTD for ITSA) became mandatory on 6 April 2026. If you are a sole trader or landlord with total gross income above £50,000, the new rules already apply to you — and if you have received an HMRC mandation letter but are not sure what it means in practice, this guide explains everything clearly.
Who Is Affected Right Now?
The first wave covers sole traders and landlords whose total qualifying income — combined gross income before expenses from self-employment and property rental — exceeded £50,000 in the 2024/25 tax year. MTD is being phased in over three years:
| Start Date | Income Threshold | Based On |
|---|---|---|
| 6 April 2026 | Over £50,000 | 2024/25 Self Assessment return |
| 6 April 2027 | Over £30,000 | 2025/26 Self Assessment return |
| 6 April 2028 | Over £20,000 | 2026/27 Self Assessment return |
If you are both a sole trader and a landlord, HMRC combines those income streams. A self-employed designer earning £32,000 who also receives £22,000 in rent has qualifying income of £54,000 — and is in scope now. Partnerships and limited companies are not included in this phase.
What Are You Now Required to Do?
Under the old system, you filed one Self Assessment return each year. MTD replaces that with a more continuous process — though less complicated than it might first sound.
If you have both a trading business and a rental property, you will submit separate quarterly updates for each — one for your trade, one for your property income.
The Good News for This First Year
HMRC has confirmed that no penalty points will be issued for late quarterly updates during the 2026/27 tax year. This grace period has been put in place to allow the system to settle and for taxpayers to adjust without the immediate threat of fines.
The new penalty system works on an accumulative points basis. A £200 fine is only triggered once four points are accumulated — more measured than the old fixed-penalty regime, but it still adds up quickly for anyone who consistently misses deadlines.
Which Software Do You Need?
HMRC does not provide its own free software for MTD for Income Tax. You will need to use approved third-party software. The most widely used options are:
| Software | Best For |
|---|---|
| Xero | Sole traders with more complex affairs; strong bank feeds |
| QuickBooks | Sole traders and landlords; user-friendly with a good mobile app |
| FreeAgent | Landlords with straightforward property income; free with NatWest/RBS/Ulster Bank business accounts |
| Bridging software | Those who prefer spreadsheets — you can still record in a spreadsheet but must use bridging software to submit to HMRC |
HMRC maintains a software finder tool on GOV.UK. If you are unsure which option suits your situation, we are happy to advise and can work within whichever platform you choose.
What You Should Do Now
Check your 2024/25 income. If your combined gross income from self-employment and property exceeded £50,000, you are in scope now.
Register for MTD. Registration is not automatic — even if HMRC has written to you, you need to actively sign up via your Government Gateway account. We can handle this on your behalf.
Choose and set up your software. Select an HMRC-approved product and connect your bank accounts. We can recommend the right tool and get you set up.
Start keeping digital records. From 6 April 2026 onwards, income and expenses should be recorded digitally. The sooner you start, the cleaner your first quarterly update will be.
Talk to us. If you want someone to take this off your plate entirely, get in touch. We are helping clients through this transition every day.
Sources
- GOV.UK — Making Tax Digital for Income Tax Self Assessment for sole traders and landlords
- Propertymark — Tax is going digital on 6 April 2026
- Naseems — UK Business News 2026: MTD updates
- STEP — Making Tax Digital now imminent for traders and landlords
- The Independent Landlord — MTD for Income Tax: what landlords need to know
- Bishop Fleming — Making Tax Digital: how it changes recording for landlords and sole traders
Let Us Handle Your MTD Set-Up
From registration and software selection to quarterly submissions and your Final Declaration — we take care of the whole process so you do not have to.
