4 June 2026
By Lyn Oaten, Co-Founder
April has been and gone, and with it the start of the new tax year.
For many business owners and landlords, that means the first couple of months of 2026/27 are already underway. Your records are being created, invoices are being issued and expenses are starting to build.
That matters because this is the tax year in which Making Tax Digital (MTD) for Income Tax becomes mandatory for sole traders and landlords with qualifying income of more than £50,000.
From 6 April 2026, those affected must keep digital records, use compatible software and send quarterly updates to HMRC.
The first quarterly update will cover the period from 6 April to 5 July 2026 and must be submitted by 7 August 2026.
If you are affected and have not yet got your systems in place, there is still time to get organised. But the window for calmly preparing is getting smaller.
The official explanation is that MTD is designed to modernise tax reporting, reduce errors and make the tax system more efficient.
That is all true enough.
But from a business point of view, the more important question is: what does it change in practice?
For many small businesses, tax records are still treated as something separate from day-to-day decision-making.
Invoices are raised, receipts are stored, bank transactions are checked when there is time and the real financial picture only becomes clear once the accountant starts preparing the year-end figures.
That is not ideal.
If you only understand your profit, cashflow and tax position months after the event, you are always reacting.
You may be making decisions on old information, guessing how much Tax to put aside or assuming the business is performing better than it really is.
MTD will not solve all of that on its own.
Software is not a strategy but it does encourage a better habit: keeping records current, checking figures more regularly and using your accounts as a live business tool rather than a historic admin exercise.
That is where the real value sits.
From 6 April 2026, it applies to sole traders and landlords with qualifying income of more than £50,000, based on the 2024/25 tax year.
From 6 April 2027, the threshold drops to more than £30,000. From 6 April 2028, it is expected to apply from more than £20,000.
One of the most important points is that this is based on income before expenses, not profit.
So, a landlord or sole trader with relatively modest profit could still be caught if their gross income exceeds the threshold.
It also looks at combined income from self-employment and property. For example, if you have a sole trade and rental income, both may need to be considered together.
That is why you should not assume MTD does not apply just because your taxable profit feels lower than the headline figure.
If you are within MTD for Income Tax, you will need to keep digital records using compatible software, send quarterly updates to HMRC and submit a final tax return by 31 January after the end of the tax year.
For those in the April 2026 group, the first quarterly update is due by 7 August 2026.
Further quarterly deadlines follow on 7 November 2026, 7 February 2027 and 7 May 2027.
In simple terms, you will need to:
The quarterly updates are not the same as producing a full set of accounts four times a year.
However, they do mean your records need to be in good enough shape to report income and expenses regularly.
That is the part many people underestimate.
If you are reading this in June, you are in a useful position.
You are far enough into the tax year to have real records to work with, but not so far in that everything has become a scramble.
There is still time to choose software, set up bank feeds, tidy up your categories and get into the habit of recording income and expenses properly before the first update is due.
Leaving this until late July or early August is where the pressure starts.
At that point, you are not just choosing software.
You are trying to understand the rules, check whether you are signed up correctly, sort your records, learn a new system and meet a filing deadline at the same time.
That is not impossible, but it is unnecessary.
The businesses and landlords who struggle with MTD are unlikely to be those who find the software difficult on day one.
They are more likely to be those who have never had a proper record-keeping process in the first place.
If your bookkeeping currently relies on memory, paper piles, late-night spreadsheet sessions or sending everything to your accountant once a year, MTD will expose the weak spots very quickly.
That is not something to be embarrassed about. Plenty of good businesses have messy admin behind the scenes.
But it is something to deal with now, while there is still time to do it properly.
Landlords should pay particular attention to MTD because the rules may apply even where property income feels like a side activity rather than a business.
Jointly owned properties, mixed property portfolios and landlords with both employment and rental income can all create questions about how MTD applies in practice.
There are also easements available in some situations, including simplified reporting for certain landlords.
The key point is not to guess.
If you own rental property and your gross income is near the threshold, now is the time to check your position properly.
It is much easier to put the right system in place before the first reporting deadline than to untangle everything afterwards.
Being MTD ready is not just a software decision. It is an operational decision.
It means you know when the rules apply to you.
You know which records need to be kept digitally.
You know how your income and expenses will be captured.
You know who will submit the updates.
You know whether your current software is compatible or whether you need to change.
Most importantly, you know how the process will work in real life.
That last part matters because the right setup for one person may be completely wrong for another.
A landlord with one rental property does not necessarily need the same process as a sole trader with hundreds of monthly transactions.
A consultant who invoices a few clients may need something different from a tradesperson dealing with materials, mileage, subcontractors and cashflow pressures.
Good MTD planning starts with the way you actually work, not with a generic software recommendation.
It would be easy to see MTD as another HMRC demand and in some ways, it is.
But if you are going to spend time improving your record-keeping anyway, you may as well make that effort work harder for you.
Better records can help you understand which work is profitable, spot rising costs earlier, keep money aside for Tax, make borrowing conversations easier and avoid making decisions based on gut feeling alone.
For landlords, better records can make it easier to understand the real return on a property once repairs, mortgage interest, agent fees, insurance and Tax are all considered.
For sole traders, they can make the difference between thinking you are busy and knowing whether that busyness is actually translating into profit.
That is why I think the best way to approach MTD is not to ask, “What is the minimum I need to do to comply?”
A better question is: “How can I use this change to get better control of my finances?”
MTD is much easier to manage with the right support.
Your accountant can help you confirm whether the rules apply, choose suitable software, set up your records correctly and avoid mistakes before they become costly.
More importantly, they can help you use MTD as more than a compliance exercise. With better, more regular financial information, you can review cashflow, plan for Tax and make stronger decisions throughout the year.
If you are in the first wave, the first reporting period is already underway.
Now is the time to check your systems, speak to your accountant and get everything in order before the first deadline starts to feel close.
Please get in touch with our team for more information or help adapting to the new way of reporting.