Making Tax Digital (MTD) is no longer a future concept or something to “deal with later”. For many sole traders and landlords, the first compulsory phase begins in April 2026 – and based on what we’re seeing, far more people will be affected than they currently realise.
We recently published our Pay Less Tax – Making Tax Digital 2026 guide to help clients understand what’s changing, who’s affected, and what practical steps they should be taking now.
Here’s why MTD matters – and why early preparation is essential.
A once-in-a-generation change to income tax reporting
For decades, Self Assessment has followed a familiar rhythm: keep your records, submit one annual return, and settle the tax due. MTD fundamentally changes that approach.
Under MTD for Income Tax Self Assessment, reporting becomes digital and quarterly, not annual. Instead of submitting information once a year, affected taxpayers will need to maintain digital records and send regular updates to HMRC throughout the year, followed by a final declaration after year end.
For many, this will represent the biggest compliance change they experience in their working lifetime.
Who will be affected – and when?
MTD will be introduced in stages, based on income levels:
- From April 2026, if your combined income from self-employment and/or property is £50,000 or more
- From April 2027, if your income is £30,000 or more
- From April 2028, if your income is £20,000 or more
Importantly, this is based on gross income, not profit, and income is combined across qualifying sources. This is one of the main reasons people are being caught out.
In our guide, we highlight examples where individuals with modest profits – or mixed income streams – still fall within MTD simply because of how their income is structured.
The practical reality of MTD
Once within scope, taxpayers will need to:
- Keep digitally linked records
- Submit quarterly summaries of income and expenses to HMRC
- Complete a final declaration by 31st January, similar to the current process
Those with more than one qualifying business may need to submit separate quarterly updates for each, increasing the importance of having the right systems in place from the outset.
While quarterly submissions are not tax payments, they are compliance deadlines – and missing them can lead to penalties.
Penalties are a real risk
One of the strongest messages in our MTD guide is around penalties. Under the new system, missed deadlines can quickly result in fines, with further penalties and interest applying to late payments.
We’ve already seen how easily points can accumulate, particularly for those unfamiliar with quarterly reporting. This is why preparation isn’t just helpful – it’s essential.
Can MTD be avoided?
In limited circumstances, yes – but not without careful consideration.
Some exemptions exist, and certain groups are currently deferred. However, restructuring solely to avoid MTD can introduce wider tax and commercial risks. Any decision in this area should be made with professional advice, taking the full picture into account.
This is a key point we stress throughout the Pay Less Tax guide.
Why acting early makes a difference
Although April 2026 may seem a way off, the reality is that successful transitions to MTD take time. Choosing the right software, setting up digital processes, and adapting to quarterly reporting are all far smoother when done gradually.
Businesses that leave this until the last minute risk rushed decisions, avoidable stress, and potential penalties.
Our advice
MTD isn’t just about compliance. Done properly, it can give businesses better visibility over their finances, fewer surprises, and more control over tax planning throughout the year.
If you’re a sole trader or landlord – especially with multiple income sources – now is the time to understand how MTD affects you.
You can download our Pay Less Tax – Making Tax Digital 2026 guide for a detailed breakdown, examples, and practical solutions.
Or, if you’d prefer a conversation, contact us at mtd@thornewidgery.co.uk.