Making Tax Digital for Income Tax: What sole traders need to know in 2026

Making Tax Digital for Income Tax (MTD for IT) launched in April 2026 for sole traders and landlords with income over £50,000. If you are affected — or approaching that threshold — here is everything you need to understand.

What is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax is HMRC's programme to move self-employment tax records and submissions online. Under MTD for IT, affected taxpayers must keep digital records and send quarterly updates to HMRC throughout the year, rather than filing a single annual Self Assessment return.

MTD for VAT has been in place since 2019. MTD for Income Tax is the extension of that approach to self-employment and property income.

Who is affected and when?

The rollout is phased by income level:

• +April 2026: Sole traders and landlords with total qualifying income over £50,000
• +April 2027: Those with income over £30,000
• +April 2028: Those with income over £20,000 (currently proposed)

Qualifying income means income from self-employment and/or property. PAYE employment income does not count towards the threshold.

What are quarterly submissions?

Instead of one annual return, you submit four quarterly updates per tax year plus a Final Declaration. The quarters align with the UK tax year (6 April to 5 April):

• +Q1: 6 April to 5 July — submission due 7 August
• +Q2: 6 July to 5 October — submission due 7 November
• +Q3: 6 October to 5 January — submission due 7 February
• +Q4: 6 January to 5 April — submission due 7 May
• +Final Declaration: Due 31 January following the end of the tax year

The quarterly submissions are summaries of income and expenses for that quarter. The Final Declaration is where you confirm everything and any additional allowances or reliefs.

What does digital record-keeping mean in practice?

HMRC requires you to keep records of all business income and expenses in a digital format. A spreadsheet or Notion database qualifies — paper records alone do not.

You do not need to use specialist MTD software for record-keeping, but you do need MTD-compatible software to make the actual quarterly submissions to HMRC. Most accountants and services like QuickBooks, Xero, and FreeAgent are MTD-compatible.

The division of labour most freelancers find works well: keep your records in Notion or a spreadsheet (organised by quarter), then hand the totals to your accountant or MTD software for the actual submission.

What happens if you miss a quarterly submission?

HMRC is introducing a points-based penalty system for MTD for IT. You accumulate a penalty point for each missed submission. Once you reach the threshold (four points for quarterly filers), you receive a £200 fine. Points can be reset by submitting on time for a sustained period.

This is a significant change from the current annual penalty regime. Staying on top of quarterly deadlines matters.

How to prepare

• +Set up digital record-keeping now if you have not already — categorise every transaction by HMRC expense category
• +Tag every income entry to its relevant quarter so your quarterly totals are ready before the deadline
• +Choose your MTD-compatible submission software (your accountant, FreeAgent, QuickBooks, or similar)
• +Sign up for MTD for IT via your Government Gateway account if you are above the threshold