Making Tax Digital for Income Tax: What Landlords and Sole Traders Earning £50k+ Must Do Now

If you’re a sole trader or landlord and your gross income was above £50,000 in the 2024/25 tax year, the way you report to HMRC has already changed. Making Tax Digital for Income Tax (MTD ITSA) became mandatory for this group from 6 April 2026, replacing the single annual Self Assessment return with quarterly digital reporting. Here’s what’s actually required.

Who’s affected, and when

MTD for Income Tax is being phased in based on your gross qualifying income - turnover from self-employment and/or property, before expenses or allowances - as declared on a previous Self Assessment return:

• From 6 April 2026: gross qualifying income over £50,000, based on your 2024/25 tax return.
• From 6 April 2027: gross qualifying income over £30,000, based on your 2025/26 tax return.
• From 6 April 2028: gross qualifying income over £20,000, based on your 2026/27 tax return.

Qualifying income is based on gross turnover, not profit - so a landlord or sole trader with high turnover but modest profit can still be caught. It combines self-employment and property income together, and includes income from sources you’ve since stopped, if you still have another qualifying source running. Bear in mind this turnover test is separate from your adjusted net income for other thresholds - landlords and sole traders whose total income creeps over £100,000 should also check how the Personal Allowance taper can push their effective tax rate to 60%, since rental and self-employment profits count toward that limit too.

What actually changes

Instead of one annual Self Assessment return, those within scope now need to:

• Keep digital records of income and expenses throughout the year, using MTD-compatible software (HMRC doesn’t provide its own - options range from full accounting packages like Xero and QuickBooks to simpler bridging software that connects a spreadsheet to HMRC’s systems).
• Submit four quarterly updates a year, each a summary of income and expenses for that three-month period - not a full tax calculation, just totals.
• Submit a Final Declaration by 31 January after the end of the tax year, replacing the old Self Assessment return, to confirm total income, claim reliefs, and finalise the tax calculation.

Standard quarterly update deadlines fall on 7 August, 7 November, 7 February, and 7 May, one month after each standard tax-year quarter ends. You can elect to use calendar-month quarters instead, but this must be set before your first submission and can’t be changed mid-year.

Payment dates haven’t changed

MTD changes how often you report, not when you pay. The usual Self Assessment payment dates - the balancing payment and first payment on account by 31 January, and the second payment on account by 31 July - still apply.

The ‘soft landing’ for the first cohort

For those brought into MTD from April 2026, HMRC has confirmed no penalty points will be charged for late quarterly updates during the first year (2026/27), giving this group time to adjust to the new system without financial risk for a missed quarterly deadline. This soft landing doesn’t extend to the Final Declaration deadline, which carries the usual late-filing penalties, and it isn’t expected to apply to the 2027 or 2028 cohorts in the same way.

The penalty system once soft landing ends

• Late submissions (quarterly updates or the Final Declaration) earn one penalty point each. Reaching four points triggers a £200 fine, with further penalties for continued non-compliance. Points expire after a period of sustained compliance.
• Late payment penalties are separate and tiered, starting to accrue from around 16 days after a payment is due and escalating if it remains unpaid.

Who’s automatically exempt

• Trusts, estates, and non-resident companies.
• Anyone considered digitally excluded due to age, disability, location, or lack of internet access, or on religious grounds - these can apply for exemption.
• Some non-resident individuals with specific Self Assessment entries relating to residence status may qualify for a temporary exemption.

What to do if you think you’re affected

• Check your 2024/25 Self Assessment return for your gross qualifying income from self-employment and property combined.
• Don’t wait for a letter from HMRC - HMRC reviews returns and writes to those it identifies as affected, but the responsibility to sign up and comply sits with you regardless of whether a letter arrives.
• Choose MTD-compatible software and begin keeping digital records now if you haven’t already, rather than waiting for your first quarterly deadline to arrive.
• If you’re close to a threshold - particularly the £30,000 line landing in April 2027 - start monitoring your gross income now, since it’s based on a tax return you’ll file well before the rules apply to you.

The bottom line

If your gross self-employment or property income was over £50,000 in 2024/25, you should already be keeping digital records and preparing for quarterly updates under MTD. If you’re between £30,000 and £50,000, you have a year’s grace before the rules extend to you in April 2027 - worth using to get comfortable with compatible software before it becomes mandatory.