The first phase of the introduction of Making Tax Digital (MTD) for Income Tax will start on 6 April 2026, which is not too far off now! The significant changes that it will bring will affect about 780,000 UK sole traders and landlords.
Although the introduction date is fast approaching, there’s still plenty of time to get ready for MTD for Income Tax. HMRC, accountants and tax experts recommend that sole traders and landlords should start to prepare as soon as possible, especially if they’re not currently using accounting software.
The sooner you get ready, the better placed you’ll be to ensure that meeting MTD for Income Tax rules will be as easy as possible. If you’re a sole trader or landlord, here’s a handy checklist of key tasks to help you get ready for MTD for Income Tax.
Get ready for MTD for Income Tax checklist
1. Estimate your gross trading or gross rental income
- Gross means trading or rental income before any tax expenses are deducted. Based on previous figures, estimate what you’re likely gross trading or gross rental income will be in the 2026/27 tax year.
2. Work out when MTD for Income Tax will affect you
- 6 April 2026: sole traders/landlords with a gross trading/rental income of more than £50,000 a year.
- 6 April 2027: those with a gross annual trading/rental income of more than £30,000.
- 6 April 2028: those with a gross annual trading/rental income of more than £20,000.
- HMRC has not yet announced when sole traders/landlords with an annual gross trading or gross property income of up to £20,000 will be impacted by MTD. No news either on those who operate business partnerships.
3. Find out about new MTD recording requirements
- If your income means MTD for Income Tax rules apply to you, you must keep accurate digital accounting records of your income and expenses.
- Using paper-based accounting records isn’t an option – regardless of your personal preference.
- There will be very few MTD for Income Tax exemptions, but they may be granted if someone’s age, disability or location means they’re “digitally excluded” (basically, can’t get online or perform tasks online). Exemptions may also be granted on religious grounds
- You’ll need to update your financial records fully before the end of every quarter (much more regularly is advised). This can certainly help you to better understand how well your business is performing in real time.
- You must make sure that all of your income and tax expenses are recorded digitally, which means using accounting software or digital spreadsheets.
4. Learn about new MTD reporting requirements
- Each quarter, you must report summaries of your income and expenses to HMRC digitally (ie do it online).
- You can either use MTD for Income Tax-compliant accounting software or “bridging software”, which will enable you to report figures digitally to HMRC if you use digital spreadsheets to maintain your financial records.
- If you update your figures regularly and get the right software, quarterly reporting will be simple enough. A few clicks and it will be done.
5. Know your quarterly MTD reporting deadlines
- You have a month after the quarterly period end date to send your quarterly update digitally to HMRC. Corrections and adjustments to previous updates can be made in your next update.
| Update period | Filing deadline | |
| Quarterly update 1 | 6 April to 5 July | 7 August |
| Quarterly update 2 | 6 April to 5 October | 7 November |
| Quarterly update 3 | 6 April to 5 January | 7 February |
| Quarterly update 4 | 6 April to 5 April | 7 May |
6. Learn what happens after the fourth quarter
After you’ve sent your fourth quarterly update your software will show your income and expenses for the whole tax year (for each business if you have more than one).
You can then adjust the data by:
- making tax adjustments (eg removing disallowable expenses)
- making accounting adjustments (eg for prepayments or accruals)
- adjusting your taxable income and tax expenses (eg if your accounting period isn’t aligned to the UK tax year – 6 April to 5 April)
- claiming reliefs (eg allowable expenses) or allowances (eg capital allowances).
- Then you will need to make a final declaration to HMRC, confirming that all of the data you’ve supplied is accurate and complete.
7. Sort out your MTD for Income Tax compliant software
- This is key to complying with MTD for Income Tax rules. Failure to do so will likely mean having to pay a penalty.
- HMRC isn’t making available its own MTD for Income Tax software.
- Sage’s accounting software solutions for sole traders and landlords are recognised by HMRC and are fully MTD-ready.
- While some software will be able to report all taxable income sources (ie sole trader and rental), others may only report one. If you need to report different types of taxable income, make sure that your software is suitable.
- Some sources of taxable income may still need to be reported by completing a Self Assessment tax return.
- If you’re already using accounting software, find out from your software provider whether it is fully MTD for Income Tax compliant and suited to your specific needs.
8. Get used to using your MTD for Income Tax-compliant software
- Connect it to your credit card and bank account so that income and expenses are automatically accounted for in your records. This will save you lots of time.
- Find out what capabilities your accounting software offers you and gain the knowledge you need to maximise your benefits. You might be pleasantly surprised by just how easy it is to use accounting software.
- Find out how the software can help you to comply with MTD for Income Tax reporting requirements, which should be simple enough.
- If necessary, seek support and guidance from your software supplier.
- Set aside time, each week or fortnight, to fully update your accounting software. Stay on top of your figures – especially your expenses.
9. Seek MTD support from an accountant or bookkeeper
- If you’re really struggling to get to grips with MTD for Income Tax and the deadline is fast approaching, reach out for support from an accountant or bookkeeper. They should be able to advise you on how to limit the impact of MTD for Income Tax.
- If you already use an accountant or bookkeeper, they’ll likely take care of everything for you anyway, including using MTD-compliant accounting software. Support from a good accountant or bookkeeper should make MTD compliance painless.
