07 Feb Making Tax Digital 2026: Do You Qualify? (And What to Do If You Do)
If you're a sole trader or landlord, you've probably heard whispers about Making Tax Digital for Income Tax (MTD for ITSA) coming in April 2026. Maybe you've been ignoring those HMRC letters, hoping it'll all go away. Spoiler: it won't.
But here's the good news: it's really not as scary as it sounds. Once you know whether you're affected and what you need to do, you can sort it out well before the deadline. Let's break it down in plain English.
So, Do You Actually Qualify?
The short answer: if you're a sole trader or landlord with total qualifying income over £50,000, you're in.
From 6 April 2026, HMRC wants you using digital software to keep records and send them quarterly updates. This applies if you meet all three of these criteria:
- You're registered for Self Assessment as a sole trader, landlord, or both
- You earn income from self-employment or property (or a combination)
- Your qualifying income is above £50,000
That threshold is based on the income you report on your 2024/25 tax return: the one due by 31 January 2026. So if you're sitting at £49,500, you're safe. Hit £50,001? You're in.
What Counts as "Qualifying Income"?
This is where it gets a bit specific, and it's worth understanding properly.
Qualifying income means your gross income (turnover or rent) from all your self-employment and property businesses combined: before you deduct any expenses.
Here's what HMRC includes:
- Self-employment turnover (if you're a sole trader)
- Rental income from property (if you're a landlord)
- Income from multiple businesses or properties (they're added together)
And here's what doesn't count:
- Wages from PAYE employment
- Dividends from shares
- Investment income
- Pension income
So if you earn £40,000 from your plumbing business, £15,000 from a rental property, and £30,000 as a salaried employee, your qualifying income is £55,000: you're in scope. That PAYE job doesn't get you off the hook.
What You'll Actually Need to Do
If you qualify, here's what changes from April 2026.
You'll need to:
- Use HMRC-compatible software to keep digital records of your income and expenses
- Send quarterly updates to HMRC (covering three-month periods)
- Still submit a final tax return by 31 January following the end of the tax year
- Pay your tax bill as usual by the same deadline
The first quarterly update for the 2026/27 tax year is due by 7 August 2026. That covers the period from 6 April to 5 July 2026.
These updates aren't tax calculations: they're just summaries of your income and expenses for that quarter. Think of them as progress reports. Your actual tax bill gets sorted at the end of the year, same as always.
The big shift here is moving from annual record-keeping (or let's be honest, stuffing receipts in a shoebox until January) to staying on top of things throughout the year.
How to Prepare Now
Step one: Check if you're in scope.
Look at your most recent Self Assessment return. Add up your gross self-employment and property income. If it's over £50,000, you're affected.
Haven't received a letter from HMRC? That doesn't mean you're exempt. It's your responsibility to check and comply if you meet the criteria.
Step two: Get your software sorted.
You'll need HMRC-compatible software to keep digital records and submit updates. Spreadsheets alone won't cut it (though there is bridging software if you really want to stick with Excel: more on that in another post).
The most popular choice for small businesses is Xero, and for good reason. It's designed for exactly this kind of thing: cloud-based, easy to use, and automatically keeps everything HMRC needs in the right format.
We're Xero Platinum Champions here at Harrison's Accountancy, which basically means we live and breathe the stuff. We can help you get set up, import your existing records, and train you so you're confident using it.
Step three: Start organizing your records now.
If you're currently doing things the old-fashioned way (paper receipts, bank statements in a drawer, notes on your phone), now's the time to go digital.
Take photos of receipts using your phone, save invoices as PDFs, and start categorizing things properly. The better your records are before you switch to MTD, the smoother the transition will be.
Step four: Talk to your accountant.
If you're working with an accountant (like us), have a chat about MTD sooner rather than later. We can:
- Confirm whether you're definitely in scope
- Recommend the best software for your situation
- Help you get everything set up
- Take on the quarterly submissions if you'd rather not deal with them yourself
The earlier you start this conversation, the less stressful it'll be when April 2026 rolls around.
What Happens If You Do Nothing?
Let's be clear: ignoring MTD isn't an option.
If you're required to join and don't comply, you could face penalties from HMRC. They haven't published the exact penalty structure yet, but it's safe to assume they'll follow similar rules to other MTD regimes (like MTD for VAT).
More importantly, leaving it until the last minute means you'll be rushing to get software, learn how to use it, and catch up on months of records all at once. Not fun.
What's Coming After 2026?
If you're just under the £50,000 threshold and thinking you've dodged a bullet, don't get too comfortable.
From 6 April 2027, the threshold drops to £30,000.
And from April 2028, it's expected to drop again to £20,000.
So even if you're not affected in 2026, there's a good chance you will be soon. Getting ahead of it now means you'll be sorted when the time comes.
How We Can Help (Without the Hard Sell)
Look, MTD is happening whether we like it or not. Our job is to make sure you're ready without it taking over your life.
As Xero Platinum Champions, we've helped dozens of sole traders and landlords get set up with the right software and systems. We can handle the technical stuff: software setup, quarterly submissions, making sure everything's filed correctly: so you can focus on actually running your business.
If you're not sure whether you qualify, or you just want to have a chat about what MTD means for you, get in touch. We'll go through your situation, answer your questions, and work out the best way forward.
No pressure, no jargon: just straightforward advice from people who've been doing this for years.
The Bottom Line
MTD for Income Tax might sound like another layer of admin (because let's face it, it is), but it doesn't have to be a nightmare.
If your qualifying income is over £50,000, you're in scope from April 2026. You'll need compatible software, and you'll be sending HMRC quarterly updates. But with the right setup and a bit of preparation, it can actually make your life easier: no more January panic, no more lost receipts, and better visibility of how your business is doing throughout the year.
Get yourself sorted now, and by the time April comes around, you'll be cruising while everyone else is scrambling.
And if you need a hand? You know where we are.
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