Are you one of them? 864,000 sole traders and landlords face new tax rules in just two months

Act now to prepare for Making Tax Digital for Income Tax (MTD for IT).

From 6 April 2026, approximately 864,000 sole traders and landlords with qualifying income over £50,000 annually will need to:

• keep digital records,
• use MTD-compatible software and
• submit quarterly summaries of their income and expenses to HMRC.

Qualifying income is gross income from self-employment and property before any tax allowances or expenses are deducted.

HMRC is urging those in scope to read the guidance, choose software and sign up on GOV.UK. Those who use a tax agent should speak to them about preparing.

What’s happening?

From 6 April 2026, those eligible will need to use recognised software to keep digital records.

They will also have to send HMRC light-touch quarterly updates of their income and expenses. These are not extra tax returns.

And at the end of a tax year, those within MTD will still need to file a tax return by the following 31 January.

How’s MTD for IT being introduced?

Those joining MTD in April 2026 will still file their tax return for the 2025 to 2026 tax year in the usual way by 31 January 2027, as this covers the period before MTD begins.

The first MTD tax return, covering the 2026 to 2027 tax year, will be due by 31 January 2028.

Under the new system, penalty points will be given for each late submission, with a £200 penalty only applied once four points are reached. This means occasional slip-ups won’t result in immediate fines.

To support the transition, the government has announced that customers joining MTD for IT in April 2026 will not receive penalty points for late quarterly updates, for the first 12 months.  

Tools available

HMRC is providing a range of free support to help people prepare, including online guidance, webinars and videos.

Free software options are available and once income and expenses are recorded, the software generates a simple summary to send to HMRC.

The software will already hold the information from the quarterly updates, meaning no last-minute hunt for records or receipts when it comes to filing the end-of-year tax return.

Who is exempt?

Those who genuinely cannot use digital tools – the digitally excluded – can apply for an exemption. Further information and guidance are available on GOV.UK.

For now, MTD only applies to those with gross income above £50,000. However, the threshold for qualifying income is going to get lower:

• anyone with gross income above £30,000 will need to comply with MTD from April 2027
• the threshold decreases again to £20,000 from April 2028.

What does HMRC say about MTD?

Craig Ogilvie, HMRC’s Director of Making Tax Digital, said:

“With two months to go until MTD for IT launches, now is the time to act. A range of software is available and the system is straightforward and helps reduce errors. Thousands of volunteers have already used it successfully.

“This will make it easier for sole traders and landlords to stay on top of their tax affairs and help ensure everyone pays the right amount of tax.

“Spreading your tax admin throughout the year means avoiding that last minute scramble to complete a tax return every January. Go to GOV.UK and start preparing today.”

AAT Comment offers news and opinion on the world of business and finance from the Association of Accounting Technicians.