Making Tax Digital for Income Tax: a guide for sole traders and landlords (2026/27)
Making Tax Digital for Income Tax applies from 6 April 2026 to sole traders and landlords whose qualifying income, meaning turnover plus gross rents, was over £50,000 in 2024/25. The threshold falls to £30,000 from April 2027 and £20,000 from April 2028. You keep digital records, send quarterly updates and file through compatible software. Late quarterly updates earn no penalty points in 2026/27.
By George Nicholson BFP ACA, ICAEW Chartered Accountant · Last reviewed 20 October 2026
Who has to use Making Tax Digital for Income Tax, and when?
Sole traders and landlords registered for Self Assessment join in three waves, based on their qualifying income two tax years earlier (GOV.UK: find out if and when you need to use MTD):
| Start date | Qualifying income over | Tax year tested |
|---|---|---|
| 6 April 2026 | £50,000 | 2024/25 |
| 6 April 2027 | £30,000 | 2025/26 |
| 6 April 2028 | £20,000 | 2026/27 |
So your 2025/26 return, due by 31 January 2027, decides whether you join in April 2027. HMRC writes to people above the threshold, but you are responsible for checking even without a letter. Since September 2026 HMRC has also been signing up, in stages, people over £50,000 who had not joined (GOV.UK). Once in, you stay in unless your qualifying income is below the threshold for three tax years in a row. Our MTD checker shows where you stand.
What counts as qualifying income?
Your total self-employment and property income before any expenses, mortgage interest or allowances: in effect, turnover plus gross rents (GOV.UK: work out your qualifying income). Every trade and property source is added together, including your share of jointly owned property and, if you live in the UK, foreign property. Partnership profit shares, employment income, dividends and pensions do not count.
What digital records and software do I need?
You need software that works with Making Tax Digital, and digital records of your business and property income and expenses, each with the amount, the date and a category matching the Self Assessment categories (GOV.UK: create digital records). Spreadsheets are allowed if they are digitally linked to bridging software. Keep records for at least 5 years after the 31 January deadline. Our bookkeeping service can keep these records for you in cloud software such as Xero.
When are the quarterly updates and tax return due?
Updates are cumulative from the start of the tax year. The deadlines are the same whether you use standard quarters from 6 April or calendar quarters from 1 April, which you choose in your software before your first update (GOV.UK: send quarterly updates).
| Standard quarters | Calendar quarters | Due by |
|---|---|---|
| 6 April to 5 July 2026 | 1 April to 30 June 2026 | 7 August 2026 |
| 6 April to 5 October 2026 | 1 April to 30 September 2026 | 7 November 2026 |
| 6 April 2026 to 5 January 2027 | 1 April to 31 December 2026 | 7 February 2027 |
| 6 April 2026 to 5 April 2027 | 1 April 2026 to 31 March 2027 | 7 May 2027 |
| Tax return (final declaration) for 2026/27 | 31 January 2028 | |
The return must include all your other income and gains, and the four updates must be sent first (GOV.UK: submit your tax return). Payment dates do not change: tax is still paid by 31 January and 31 July. Our tax deadlines 2026/27 page lists every date.
What are the MTD penalties, and is there a soft landing in 2026/27?
Yes. For 2026/27, late quarterly updates earn no penalty points (GOV.UK: penalties for MTD for Income Tax). You must still keep digital records and send every update before you can file, and a late 2026/27 return, due 31 January 2028, still earns a point.
From 2027/28, each missed deadline earns one point, however many businesses you have. At 4 points you pay a £200 penalty, then £200 for each further miss. Volunteers, and anyone who becomes exempt in 2027/28, have a 2-point threshold.
Late payment penalties
| Tax still unpaid | 2026/27 | 2027/28 |
|---|---|---|
| Paid within 15 days | No penalty | No penalty |
| At day 15 | 3% of tax owed | 4% of tax owed |
| At day 30 | A further 3% | A further 4% |
| From day 31 | 10% a year, charged daily, for up to 2 years | 10% a year |
Four points to note:
- In your first year under the new penalties, you get a one-off 30 days, not 15, to pay in full or agree a payment plan.
- The penalty applies to balancing payments and amounts due after an amendment or assessment, not to payments on account.
- If you joined in April 2026, your 2025/26 tax, due 31 January 2027, stays under the old rules: 5% at 30 days, 6 months and 12 months.
- Late payment interest is charged on top, currently 7.75% (Bank of England base rate plus 4%) (GOV.UK: HMRC interest rates).
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Making Tax Digital for sole traders and landlords: 2026/27
What changes, when it reaches you and where the savings are.
Who is exempt from Making Tax Digital?
Some people are exempt automatically, including anyone with qualifying income of £20,000 or less, people without a National Insurance number, trustees, personal representatives and partnerships (GOV.UK: MTD exemptions). If age, health, disability, religious beliefs or poor internet access make software unreasonable for you, you must apply by phone or in writing, and HMRC aims to reply within 28 days. Preferring paper, or the cost of software, is not enough. Exempt people still file a Self Assessment return.
Where can sole traders save tax?
Quarterly records make missed claims easier to spot. To see what your profit means in income tax and National Insurance, try our self-employed tax calculator.
Use of home
Claim a share of your actual household costs, or HMRC's flat rate if you work 25 hours or more a month at home: £10 a month for 25 to 50 hours, £18 for 51 to 100 hours and £26 for 101 hours or more. Phone and internet are claimed separately (GOV.UK: working from home).
Mileage
Simplified expenses allow 55p a mile for the first 10,000 business miles in 2026/27, then 25p (24p for motorcycles). You cannot use the flat rate for a vehicle you have claimed capital allowances on, and once chosen you must keep using it for that vehicle (GOV.UK: vehicles). Our mileage calculator does the sums.
Equipment and pre-trading costs
The Annual Investment Allowance gives a 100% deduction for up to £1 million of plant and machinery a year, but not cars (GOV.UK: AIA). On the cash basis, now the standard method for sole traders, equipment such as computers and vans is claimed as a normal expense instead (GOV.UK: cash basis). Allowable costs from up to 7 years before you started trading can usually be claimed as if spent on your first day (HMRC manual BIM46351).
Where can landlords save tax?
Mortgage interest
Individual landlords of residential property cannot deduct finance costs. Instead they get a 20% tax reduction on the lowest of their finance costs, property profits and income above the Personal Allowance, with unused amounts carried forward (GOV.UK: finance cost relief). From 6 April 2027 property income has its own rates, 22%, 42% and 47% in England and Northern Ireland, and the reduction rises to 22% (GOV.UK technical note). Scotland and Wales can set their own property rates.
Furniture, appliances and repairs
Replacement of domestic items relief covers like-for-like replacements of furniture, furnishings, appliances and kitchenware, but not the first purchase. For an upgrade, you claim the cost of an equivalent item (GOV.UK: working out rental income). Repairs are deductible; improvements are not, but costs such as an extension reduce your gain when you sell (GOV.UK: work out your gain).
Capital allowances
Plant and machinery allowances, including the AIA, are not available for items for use in a dwelling-house, such as a cooker in a let flat. Items serving the common parts of a block of flats, such as a shared fire alarm, can qualify (HMRC manual CA23060).
Jointly owned property
Married couples and civil partners who live together are normally taxed 50:50. If your beneficial shares are actually unequal, send Form 17 with evidence within 60 days of the declaration; HMRC has no power to extend this (HMRC manual TSEM9862). Unmarried co-owners are taxed on their actual shares.
Small lets and lodgers
The £1,000 property allowance covers small amounts of property income, or can replace actual expenses, but not alongside Rent a Room relief or the finance cost reduction. The Rent a Room Scheme makes up to £7,500 a year tax-free for furnished accommodation in your own home, or £3,750 each if shared.
Our personal tax service handles MTD for you, and our landlord tax calculator estimates your bill.
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Frequently asked questions
Will I get a penalty for a late quarterly update in 2026/27?
No. HMRC will not give penalty points for late quarterly updates in 2026/27, the first year of Making Tax Digital for Income Tax. You must still send all four updates before you can file your 2026/27 return, and a late return or late payment can still be penalised. Points for late updates start from 2027/28.
When are the Making Tax Digital quarterly deadlines?
Quarterly updates are due by 7 August, 7 November, 7 February and 7 May, whether you use standard quarters from 6 April or calendar quarters from 1 April. The 2026/27 tax return is due by 31 January 2028. Making Tax Digital does not change when you pay.
How does jointly owned property count for Making Tax Digital?
Only your share of the rents counts towards your qualifying income. If you and a co-owner each received £35,000 of gross rents in 2025/26 and had no other self-employment or property income, you would each need to use Making Tax Digital from 6 April 2027.
Written and reviewed by George Nicholson BFP ACA, ICAEW Chartered Accountant. Last reviewed 20 October 2026. This page is general information, not personal advice.
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