Making Tax Digital Goes Live

For some sole traders and landlords, Making Tax Digital Goes Live from 6 April 2026. This is one of the biggest practical changes to Income Tax reporting in years, because it changes how records are kept and how information is sent to HMRC during the tax year.

The first phase applies to individuals with qualifying income over £50,000 from self employment, property income, or both, based on the 2024 to 2025 tax year, which ran from 6 April 2024 to 5 April 2025. Those affected need to use compatible software to keep digital records and send quarterly updates to HMRC.

This is not just a filing change at the end of the year. It changes the rhythm of tax admin throughout the year. Bookkeeping, receipts, bank feeds, software setup and quarterly review routines now matter from the start of the tax year, not just when the Self Assessment deadline approaches.

For small businesses and landlords, the main challenge is not the technology itself. It is making sure the system is set up properly, records are kept consistently, and the right information is ready before each quarterly update.

Making Tax Digital (MTD) Goes Live

Making Tax Digital goes live for the first major group of Income Tax users from 6 April 2026. The rules apply to sole traders and landlords who are registered for Self Assessment, receive income from self employment or property, and have qualifying income over the relevant threshold.

For the first phase, the threshold is qualifying income over £50,000 for the 2024 to 2025 tax year. This means HMRC looks at income from 6 April 2024 to 5 April 2025 to decide who needs to start from 6 April 2026.

The next phases are also important. Individuals with qualifying income over £30,000 for the 2025 to 2026 tax year are expected to join from 6 April 2027. Those with qualifying income over £20,000 for the 2026 to 2027 tax year are expected to join from 6 April 2028.

The key change is the move to digital records and regular updates. Affected taxpayers, or their accountant, need to use software that works with Making Tax Digital for Income Tax. The software must be able to create, store and correct digital records of self employment and property income and expenses.

The software also needs to send quarterly updates to HMRC. These updates are summaries of income and expenses. They are not the same as full tax returns, but they are a regular reporting requirement during the year.

This is where the practical work begins. If a sole trader or landlord currently keeps receipts in folders, spreadsheets, bank statements, email inboxes or manual notes, they may need to change their process. The records need to be kept in a digital format that can support quarterly reporting.

HMRC does not provide its own Making Tax Digital software. Taxpayers need to choose compatible commercial software, or use an accountant who can manage the process through suitable software.

For many people, this will mean moving towards cloud accounting software, bank feeds, digital receipt capture and regular bookkeeping reviews. The aim is to avoid a large year end clean up and move towards records that are kept up to date during the year.

For Ledgr Accountants clients, this connects directly with Income Tax MTD, Bookkeeping and Accounting Software. A good setup is not only about compliance. It can also give business owners and landlords better visibility over profit, tax estimates and cash flow during the year.

How it impacts you

For sole traders, the biggest impact is the need to keep records live during the year. If your income is above the threshold, you cannot treat bookkeeping as something to fix at the end of January. The quarterly update cycle means income and expenses need to be recorded more regularly.

For landlords, the change can be equally important. Property income and expenses often sit across several places, including bank accounts, letting agent statements, mortgage records, repair invoices and insurance documents. Under Making Tax Digital for Income Tax, those records need to be organised in a way that supports digital reporting.

For people with both self employment and property income, the combined qualifying income matters. This means someone may be brought into Making Tax Digital because their total income across both sources exceeds the threshold, even if each income source looks smaller on its own.

There is also a timing issue. The first year, 6 April 2026 to 5 April 2027, is expected to be a learning year for many taxpayers. HMRC has said that late quarterly update penalty points will not apply during the 2026 to 2027 tax year, although penalties can still apply for late tax returns and late tax payments. This does not mean quarterly updates can be ignored. The updates still need to be sent before the tax return can be submitted.

The main risk is poor setup. If the wrong software is chosen, if bank feeds are not connected, or if income and expenses are coded badly, the quarterly updates may become stressful. Mistakes may then need to be corrected later, which removes the benefit of using digital records in the first place.

There is also a cash flow angle. Regular digital records can give a clearer view of profit during the year. That helps with tax planning, payment on account planning and business decisions. For example, a sole trader can see whether income has increased, whether expenses are rising, and whether tax savings need to be set aside earlier.

For landlords and small businesses, the change can also support better Management Reporting. Instead of waiting until the Self Assessment return is prepared, you can use the same digital data to understand profitability, property performance and cash flow trends throughout the year.

What you can do

Start by checking whether you are in scope. Look at your qualifying income for the 2024 to 2025 tax year, which ran from 6 April 2024 to 5 April 2025. If your total income from self employment and property was over £50,000, you may need to use Making Tax Digital for Income Tax from 6 April 2026.

Next, check whether HMRC has written to you. HMRC has said it will review Self Assessment returns and write to people who need to join. However, you should not rely only on receiving a letter. It remains your responsibility to check whether you need to use the service.

Review how your records are currently kept. If your income and expenses are spread across paper receipts, spreadsheets, personal bank accounts or email folders, this is the time to tidy the process. The earlier this is done, the easier the first quarterly update will be.

Choose suitable software. The software should be able to keep digital records, connect to your bank where possible, capture receipts, categorise income and expenses, and send quarterly updates to HMRC. Some people may also need software that handles both self employment and property records.

Set a monthly bookkeeping routine. Waiting until the quarter ends may still leave too much work to do at once. A monthly routine helps you review transactions, upload receipts, check missing information and spot errors early.

Think beyond compliance. Good digital records can support better business decisions. If the data is updated regularly, it can help with cash flow planning, tax estimates, pricing decisions, property performance reviews and Management Reporting.

Ledgr Accountants can help sole traders and landlords check whether Making Tax Digital for Income Tax applies, set up suitable Accounting Software, maintain Bookkeeping records, and prepare for quarterly updates. The aim is to make the new system manageable before it becomes a rushed deadline problem.

Ish Mukit

Senior Accountant

References

1. www.gov.uk/guidance/find-out-if-and-when-you-need-to-use-making-tax-digital-for-income-tax

2. www.gov.uk/guidance/choose-the-right-software-for-making-tax-digital-for-income-tax