Making Tax Digital (MTD) for Income Tax is now in force for thousands of sole traders and landlords across the UK.
It represents a major change in how individuals report income to HMRC, moving from an annual Self Assessment return to more regular, digital reporting throughout the year.
Who is affected?
MTD for Income Tax currently applies to:
- Sole traders
- Landlords
with qualifying gross income of more than £50,000 per year.
The rules will be extended to more taxpayers in the coming years:
- £30,000 and above from April 2027
- £20,000 and above from April 2028
If your income is approaching these thresholds, now is the time to start preparing.
What do landlords and sole traders need to do?
Under MTD, you must:
- Keep digital records of income and expenses
- Use HMRC-compatible software
- Submit quarterly updates
- Complete a final declaration after the year end
This replaces the traditional once-a-year Self Assessment process.
Understanding quarterly updates
Quarterly updates are summary submissions of income and expenses, sent to HMRC every three months.
They include:
- Total income
- Total expenses
- Categorised totals
They are not full tax returns – only summary figures are submitted, based on your digital records.
Key deadlines
Updates are due by:
- 7 August
- 7 November
- 7 February
- 7 May
A final declaration must then be submitted by 31 January following the end of the tax year.
What hasn’t changed?
Although the reporting process has changed significantly, some key aspects remain the same:
- Tax payment deadlines have not changed
- The method of calculating tax remains unchanged
- Quarterly updates do not create additional tax liabilities
MTD changes how and when you report, not how much you pay.
What does this mean in practice?
The biggest change for many sole traders and landlords is the need to maintain accurate records throughout the year and use digital systems consistently.
For those used to preparing figures at the year end, this may require a change in approach. However, it can also bring benefits, including:
- Better visibility over finances
- More accurate records
- Fewer surprises at year end
By keeping records up to date throughout the year, businesses and property owners can gain a clearer understanding of their financial position and potential tax liabilities.
How to prepare
If you are already within the scope of MTD – or expect to be in the coming years – now is a good time to:
- Review your current record-keeping processes
- Check whether your software is MTD-compatible
- Ensure income and expenses are being recorded regularly
- Seek advice if you are unsure how the rules apply to you
Early preparation can help avoid compliance issues and make the transition to quarterly reporting much smoother.
Final thoughts
Making Tax Digital for Income Tax is one of the biggest changes to personal tax reporting in recent years.
While the new requirements introduce more frequent reporting obligations, they also encourage better record keeping and provide greater visibility over your tax position throughout the year.
For those already within scope, ensuring the right systems and processes are in place is now essential. For those due to join MTD in future phases, preparing early can help make the transition much smoother.
If you’re unsure whether MTD for Income Tax applies to you, or would like support with software, record keeping or compliance requirements, our team can help. Get in touch by emailing enquiries@pmm.co.uk.
