Making Tax Digital for Income Tax: Are You Ready for April 2026?

Making Tax Digital for Income Tax is one of the biggest compliance changes in years for sole traders and landlords. With mandatory digital record-keeping and quarterly reporting starting from April 2026, this article explains who is affected, what will change, and how to prepare early to avoid last-minute pressure and penalties.

Author

The News Team

10 Feb 2026

From 6 April 2026, the way many individuals report their Income to HMRC will change fundamentally. Making Tax Digital for Income Tax (MTD for IT) will move affected taxpayers away from a single annual Self Assessment return and towards digital record keeping and quarterly reporting.

For sole traders and landlords, this is one of the biggest compliance changes in recent years. While April may feel some way off, early preparation will make the transition smoother and help you avoid unnecessary pressure, errors, or penalties.

Who Needs to Comply from April 2026?

From 6 April 2026, MTD for Income Tax will apply to individuals who are:

Self-employed, and/or
UK landlords,

with a qualifying income of over £50,000 per year as shown in your 2024/25 Self Assessment Tax Return.

Qualifying income is broadly the total gross income (before expenses) received from:

Self-employment (including multiple trades);, and
UK or overseas property rental income.

It does not include income from:

Employment taxed under PAYE,
Dividends,
Pensions,
Partnership income.

HMRC will determine whether you fall within scope by looking at your most recently submitted Self Assessment return. If you are required to comply, HMRC will contact you directly.

What are the Changes under MTD for Income Tax?

Under MTD for IT, affected taxpayers will need to:

Keep digital records

Income and expenses must be recorded digitally using HMRC -compatible software. Spreadsheets alone will not be sufficient unless they are linked to bridging software.

Submit quarterly updates to HMRC

You will submit four quarterly updates during the tax year. These are summaries of income and expenses, not tax bills.

Submit an End of Period Statement (EOPS)

After the tax year ends, you will finalise your figures for each business or property income source.

Submit a final declaration

This replaces the current Self Assessment return and confirms your total taxable income and tax due. Any tax owed (taking into account the payments on account) is still payable by 31 January following the end of the tax year.

A new points-based penalty system will apply for late submissions and payments, similar to the system already in place for VAT.

Common Pitfalls We Are Already Seeing

Although MTD for IT does not start until April 2026, HMRC pilots and early adopters have highlighted some recurring issues:

Leaving software decisions too late
Underestimating the time needed for quarterly reporting
Poor record keeping carried over from previous years
Confusion between quarterly updates and actual tax payments
Not understanding how multiple income sources are reported

Addressing these early can significantly reduce your stress once the rules go live.

How to Prepare Now: A Practical Checklist

If you may fall within scope, now is the right time to:

Confirm your qualifying income based on your latest tax return
Review your current record-keeping process and identify gaps
Choose HMRC-compatible software that suits your business or property income
Separate business and personal transactions where possible (have separate business and personal bank accounts)
Get comfortable with quarterly reporting, even before it becomes mandatory
Seek advice early to understand how MTD for IT fits into your wider tax position

Preparation does not need to be complicated, but it does need to be deliberate.

What About Future Phases?

HMRC has confirmed further staged implementation:

From 6 April 2027, MTD for IT will extend to those with qualifying income between £30,000 and £50,000.
From April 2028, it is expected to extend to those with qualifying income above £20,000.

The government has also indicated that it is exploring how to bring those who are earning under £20,000 into the regime at a later date, although no firm timetable has been set.