Making Tax Digital is live: what changes for sole traders and landlords

Making Tax Digital for Income Tax began its first mandatory phase on 6 April 2026. If you are a sole trader or landlord affected by the change, the ongoing task is to keep the right digital records. The April launch did not require a complete tax return on launch day.

The first quarterly update deadline was 7 August 2026. If that update is still outstanding, organise the missing records and arrange to submit it. Establish a manageable routine, connect your records to suitable software and understand what you will be sending for the rest of the year.

Here is what the change means for the 2026/27 tax year, and how to take the first steps without making your bookkeeping more complicated than it needs to be.

Who needs to use MTD from April 2026?

The first phase generally applies to individuals registered for Self Assessment whose combined qualifying income from self-employment and property was more than £50,000 in 2024/25, subject to exemptions. HMRC uses the income reported for that earlier tax year to determine the April 2026 starting requirement. Check HMRC’s eligibility guidance.

Qualifying income normally means income before expenses. It is not the profit left after paying suppliers, buying materials or maintaining your rental property.

For example, an electrician with £65,000 of qualifying business income and £35,000 of allowable costs has £30,000 of profit. The amount relevant to the first MTD threshold is £65,000.

Income from separate sole trades and rental activities is combined for this test. A freelance designer earning £38,000 from their business and £16,000 from rent can therefore be affected even though neither activity individually exceeds £50,000. Employment income, pensions and dividends do not normally count towards qualifying income. HMRC explains the detailed treatment in its qualifying income guidance.

A missing HMRC letter does not remove your responsibility to check. Equally, a letter should not stop you querying a genuine error or investigating an exemption.

What actually changes?

The change is a combination of digital record keeping, regular summaries and a software-based annual tax return. It sits within the Income Tax (Digital Obligations) Regulations 2026, made under the Taxes Management Act 1970 framework.

In practical terms, your ongoing records become the starting point for reporting. You, your bookkeeper or your accountant keep the relevant information in compatible software, which may include a spreadsheet connected to another product.

The software uses those records to prepare quarterly summaries. At year end, you complete the necessary adjustments, include your other taxable income and gains, and submit your annual return through suitable software.

Four updates plus the annual return

For someone with one continuing business, a useful starting picture is four quarterly updates and one annual tax return. You may also see the annual completion step called the final declaration.

However, “five digital touchpoints” is not a universal submission limit. Someone with a sole trade and a UK property business normally sends an update for each business at each quarterly deadline. Corrections and year-end work may involve further steps. HMRC’s guide to using MTD explains the overall process.

The useful change in routine is to review manageable amounts of information throughout the year. It does not mean preparing four complete personal tax returns.

The first-year dates to put in your calendar

For the standard tax-year reporting periods, the 2026/27 schedule is:

Quarterly updates are cumulative: the second includes the first six months, and the fourth covers the whole year. Calendar reporting is also available, using 1 April to the relevant month-end, with the same filing deadlines. See HMRC’s update periods and deadlines.

These dates do not remove the return for the year before MTD. If you join in April 2026, you must still submit your 2025/26 Self Assessment return, normally by 31 January 2027 for online filing.

Can you still use paper receipts or Excel?

You can keep paper receipts and enter the necessary transaction information into digital records. The problem is relying exclusively on a paper cashbook and then manually entering annual totals into the old online return process for an MTD year.

A folder of receipt photographs is not, on its own, a complete bookkeeping system either. You need usable records of the transactions, including the relevant amounts, dates and categories.

Excel remains an option. HMRC expressly recognises software that connects to records held in spreadsheets, often called bridging software. Your chosen combination must support the record keeping and submissions your circumstances require. Read HMRC’s software guidance.

If a spreadsheet works well for you, start by checking how to connect it. There is no need to rebuild a useful process simply because you have heard that spreadsheets are banned.

Do quarterly updates mean quarterly tax payments?

No. Sending a quarterly update does not introduce a new payment date every three months.

The usual Self Assessment payment timetable continues, including payments on account where applicable. Those payments normally fall on 31 January and 31 July, with any balancing payment due the following January. HMRC’s payments on account guidance explains who pays them and how they work.

An estimate shown after an update is useful for planning. It may still change when you add missing information, make adjustments or complete the annual return. Avoid treating an early estimate as the final bill.

What if digital record keeping is difficult for you?

Some people are exempt, including those who meet HMRC’s digital exclusion criteria. The question is whether using digital tools is reasonably practicable in your circumstances, rather than simply whether you enjoy using software. Check the official exemption guidance.

For the 2026/27 tax year, HMRC will not apply penalties for missing quarterly update deadlines. That does not cancel the updates or the record-keeping requirement, and it does not provide a blanket exemption from tax-return penalties or late-payment consequences. Read the first-year penalty rules.

A practical first step

Start with your 2024/25 return, list your continuing businesses and decide where their records will live. Then check software coverage, agree who will review and submit, and put the deadlines in your calendar.

Avona.app provides the self-service route at £15/month, with bank feeds, imports and Avona AI categorisation to help organise your records. Review the information, resolve anything unclear and submit the relevant update when it is ready.

MTD introduces a new reporting rhythm. A clear starting point and a repeatable routine make it much easier to manage.