Making Tax Digital for Income Tax: What’s changing next year and how to prepare
If you earn more than £50,000 a year as a self-employed earner or landlord, you will need to use the Making Tax Digital (MTD) for Income Tax from April 2026 onwards.
Under current rules, MTD requires VAT-registered businesses to keep digital records of transactions, provide HMRC with all this information quarterly, and use compliant software such as QuickBooks or Sage.
Now, these rules are being extended to sole traders and those earning income from rental properties.
While this new system is likely to save time over the long term, the change could cause some initial confusion. Here is what you need to know.
Sole traders and landlords with income of £50,000 or more will need to use Making Tax Digital for Income Tax from 6 April 2026
If you earned more than £50,000 as a sole trader or landlord in the 2024/25 tax year, you may think you will need to self-assess as normal by 31 January 2027.
In reality, you will need to declare your income through the government’s MTD for Income Tax system. This won’t change the amount of tax you pay, just how you let the government know what you have earned.
Here’s a table summarising the rules as of November 2025; please note that these rules are still subject to change.
| Making Tax Digital area | Who it applies to | What you need to do | Status |
| VAT | All VAT-registered UK businesses | Keep digital records, use MTD-compliant software, and file VAT returns digitally | Mandatory at the time of writing |
| Income Tax | Self-employed earners and landlords with gross income of £50,000 or more (from 6 April 2026) | Provide quarterly digital income updates and a final declaration using compliant software, replacing the previous one-time self-assessment system | Coming into place on 6 April 2026 |
With this in mind, you may need to:
- Speak to your accountant about the software they’re using to ensure it’s compliant with HMRC’s stipulations
- Look into compliant software yourself if you usually self-assess without an accountant
- Ensure your income records are watertight and available digitally to aid the reporting process
- Carve out time to report quarterly, rather than annually.
This could feel time-consuming at first, but as this measure is part of the push to automate earners’ financial admin, the government aims to help you save time over the long term.
In 2027, the income threshold for using Making Tax Digital will decrease to £30,000
From April 2027, the government intends to reduce the MTD for Income Tax threshold from £50,000 gross income to £30,000. There are also plans underway, which remain yet unconfirmed, to decrease the threshold to £20,000 from April 2028.
With potentially two threshold reductions on the cards in the coming three years, more earners are going to be caught in the net.
As an example, if you own two rental properties and receive £1,500 a month from each one – or £36,000 a year – you won’t need to adapt to the new MTD for Income Tax system in 2026, but you’ll be required to use it from 2027.
Consequently, it would be useful to get to grips with the rules ahead of time so that you’re prepared to use the new system when you’re required to.
There is an available exemption for the “digitally excluded” which may affect you or a loved one
Although finance is being digitised more and more, the government has acknowledged that not everybody is able to declare their income online.
If the following applies to you, there may be grounds for you to apply for an exemption from the MTD for Income Tax system.
- Your age, health condition, or disability prevents you from being able to use a computer, smartphone, or tablet.
- You can’t get access to the internet at home and have no means of accessing it elsewhere.
- Your religious beliefs prohibit the use of technology for personal reasons, and you don’t use a computer for business either.
These stipulations will only apply to the minority of people, but it’s still worth knowing that exemptions are available should you or a loved one need them.
If you want to apply for an exemption, you will need to speak to HMRC directly about your reasons.
We can help manage your wealth if you’re a sole trader or landlord
As a self-employed earner or landlord (or a combination of the two), it may already be a tricky balancing act to manage your wealth. We’re here to help with that.
We can advise on tax efficiency and make sure you are saving and investing your wealth in line with your all-important goals. Not only this, but we can connect you with trusted professionals – including accountants – who are able to provide you with the support you need.
To find out more about MTD for Income Tax, or our financial planning services more broadly, email us at hale@kelland.co.uk, or call 0161 929 8838.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate tax planning.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.