Making Tax Digital for sole traders: what changed in April 2026
By Oakridge Accounting · Updated 6 min readFigures for 2026/27
The short answer
- Since 6 April 2026, sole traders and landlords with qualifying income over £50,000 must keep digital records and send HMRC quarterly updates.
- The threshold falls to £30,000 from April 2027 and £20,000 from April 2028.
- Qualifying income is your turnover from self-employment and property added together, before expenses. It isn't your profit.
- You send four quarterly updates a year, then a final declaration by 31 January that replaces your Self Assessment return.
- The dates you pay your tax don't change.
What is Making Tax Digital for Income Tax?
Making Tax Digital (MTD) for Income Tax changes how self-employed people and landlords report their income to HMRC. Instead of one tax return a year, you keep your records in compatible software and send HMRC a summary of your income and expenses every quarter. After the tax year ends, you confirm the final figures in a year-end return called the final declaration.
It applies to the self-employment and property income you'd normally put on a Self Assessment return. It doesn't apply to income from a limited company, so a company director who is paid salary and dividends isn't brought in by that income.
Does it apply to me, and when?
Whether you have to join depends on your qualifying income: your total turnover from self-employment and property before any expenses are taken off. HMRC looks at the Self Assessment return for an earlier tax year to decide whether you're in.
| You start from | If your qualifying income was over | On your tax return for |
|---|---|---|
| 6 April 2026 | £50,000 | 2024/25 |
| 6 April 2027 | £30,000 | 2025/26 |
| 6 April 2028 | £20,000 | 2026/27 |
For example, a freelancer who invoiced £34,000 in 2025/26 joins from April 2027, even if their profit after expenses was much lower. Someone with £20,000 of self-employed turnover and £15,000 of rental income has £35,000 of qualifying income and joins from April 2027 too.
Some people are exempt or can apply to be, for example if it isn't reasonably practical for them to use digital tools. Partnerships aren't included yet.
The quarterly deadlines
Each quarterly update is due by the 7th of the month after the quarter ends:
| Quarter | Update due by |
|---|---|
| 6 April to 5 July | 7 August |
| 6 July to 5 October | 7 November |
| 6 October to 5 January | 7 February |
| 6 January to 5 April | 7 May |
You can choose to use calendar quarters (ending on the last day of March, June, September and December) instead; the deadlines stay the same. A quarterly update isn't a tax return and doesn't create a bill. It's a running total that HMRC uses to estimate your tax.
After the year ends, the final declaration confirms your figures and any adjustments, and is due by 31 January, the same date as the Self Assessment return it replaces. Your tax is still paid by 31 January and 31 July, including any payments on account.
Penalties
MTD uses a points-based system for late submissions. Each missed deadline adds a point, and once you reach four points as a quarterly filer you're charged a £200 penalty, with a further £200 for each late submission after that until your record is back in order. HMRC has said it won't give penalty points for late quarterly updates during the first year, 2026/27, but the final declaration still has to be on time, and late payment penalties apply as usual.
What you need to do
- Check your qualifying income on your latest tax return against the thresholds above.
- Keep your business records digitally in software that works with MTD, such as Xero or QuickBooks. Bank feeds make this far easier.
- Sign up for MTD for Income Tax with HMRC, or have your accountant do it for you as your agent.
- Send your quarterly updates on time, then your final declaration after the year ends.
How we handle it
On our sole trader packages, quarterly MTD reporting is included. Your books are kept current from your bank feeds throughout the quarter, so each update is prepared from records that are already done. We send the updates for you and prepare your final declaration from the same figures, so year end is mostly a quick check and your approval.
Questions people ask
Is a quarterly update the same as a tax return?
No. It's a summary of your income and expenses for the quarter. It doesn't create a tax bill. Your final position is confirmed in the final declaration after the year ends.
Does MTD change when I pay my tax?
No. You still pay by 31 January and 31 July, including any payments on account.
I'm a limited company director. Does MTD for Income Tax apply to me?
Not because of your salary and dividends. It only applies if you also have self-employment or property income over the threshold.
Is the threshold based on profit or turnover?
Turnover. It's your income from self-employment and property before expenses, added together.
This guide is general information, not advice for your situation. Tax rules change and the right answer depends on your circumstances, so speak to us (or another qualified adviser) before acting on it.