Making Tax Digital (MTD) is a major shift in how UK taxpayers record and report their income to HMRC. Designed to modernise the tax system, MTD moves businesses away from annual Self-Assessment returns toward digital record-keeping and more frequent submissions using compatible software.
While MTD has already been introduced for VAT-registered businesses, the next phase, MTD for Income Tax Self Assessment (MTD for ITSA), will apply to sole traders and landlords.
When Does Making Tax Digital Start?
MTD for Income Tax will be introduced gradually over three consecutive tax years, starting from April 2026.
Rather than applying to everyone at once, HMRC is phasing the rollout based on your annual gross qualifying income, meaning your turnover before expenses from self-employment and/or property income.
Once your income exceeds the relevant threshold, you’ll be legally required to comply with MTD rules from the start of the applicable tax year.
This staged approach is designed to give individuals and businesses time to prepare for digital reporting.
Making Tax Digital Thresholds
Below is a breakdown of when MTD will start for sole traders and landlords, depending on income levels:
| Start Date | Qualifying Income | Who It Applies To |
|---|---|---|
| April 2026 | Over £50,000 | Sole traders and landlords |
| April 2027 | Over £30,000 | Sole traders and landlords |
| Future Phase to be finalised by HMRC | £30,000 and below | Yet to be confirmed |
Qualifying income includes:
- Self-employment turnover
- UK property rental income
- Overseas property income
If your combined gross income from these sources exceeds the threshold, MTD will apply.
For example:
- A sole trader earning £55,000 → MTD from April 2026
- A landlord earning £35,000 → MTD from April 2027
HMRC will typically assess your eligibility based on previously submitted Self-Assessment returns.
What Happens if I Don’t Comply With The Making Tax Digital Deadlines?
From April 2026, HMRC will enforce compliance using a penalty points system for late submissions.
Here’s how it works:
- Each missed submission earns a penalty point
- Points accumulate over time
- Once you reach a threshold, a financial penalty is issued
For quarterly filers under MTD, this means multiple opportunities each year to incur points if deadlines are missed.
In addition to submission penalties, HMRC may also charge:
- Late payment interest
- Financial penalties for overdue tax
- Further enforcement action for repeated non-compliance
In short, staying compliant isn’t just administrative; it protects you financially.
How to Prepare for Making Tax Digital
Although April 2026 may sound some time away, preparing early will make the transition far smoother.
Here are some practical steps you can take now:
1. Choose MTD-Compatible Software
You’ll need software that can:
- Keep digital records
- Submit quarterly updates
- File year-end declarations
Cloud platforms like Xero, which are included in all our packages, are one of the leading MTD software available.
2. Move Away From Spreadsheets
While spreadsheets can still be used, they must integrate with bridging software. Most businesses find dedicated accounting software more efficient.
3. Get Comfortable With Quarterly Reporting
Under MTD, you’ll submit updates every quarter rather than once per year, so building good bookkeeping habits early is key.
4. Sign Up for MTD
When eligible, you’ll need to register with HMRC for MTD for Income Tax before your first reporting period begins.
Get Accounting Support for Making Tax Digital With SwiftBooks
Preparing for Making Tax Digital doesn’t have to be complicated, especially when you have the right support in place.
At SwiftBooks Accounting, we help sole traders and landlords transition to MTD smoothly by taking care of the full process for you. This includes setting up MTD-compatible software, migrating your records into digital systems, managing your quarterly submissions, and handling your year-end filings, all while ensuring you remain fully compliant with HMRC requirements.
With the right systems and support in place, you’ll not only stay compliant but also benefit from real-time visibility over your finances throughout the year, giving you greater clarity and control over your business performance.
If you’re unsure when Making Tax Digital starts for you, or you’d simply like to get prepared early, our team is here to help.
Get in touch today to learn how SwiftBooks can support your move to Making Tax Digital with confidence.