Making Tax Digital for Income Tax (2026): What UK Sole Traders and Landlords Need to Do

The short answer

HMRC expects about 1,077,000 more sole traders and landlords to join in April 2027, on top of the people over £50,000 already in it. Everything below comes from GOV.UK and from providers' own pricing pages, read on October 22, 2026. We keep books, so where we mention ourselves we say so.

Who has to use it, and when

Making Tax Digital for Income Tax is for sole traders and landlords registered for Self Assessment. A limited company pays Corporation Tax instead, so it isn't covered. When you start depends on your qualifying income in an earlier tax year:

HMRC checks each year's tax returns and writes to people over the threshold. But in its words, “If you did not receive a letter, it is still your responsibility to check”. HMRC also says that from September 2026 it will sign up anyone who needs it for 2026 to 2027 and hasn't signed themselves up. Partnerships will join later, on a timeline HMRC hasn't published.

What counts as qualifying income

Your total income from self-employment and property before expenses: your turnover, not your profit, taken from your tax return. HMRC's own example is £25,000 of rent and £27,000 of self-employment income: £52,000 of qualifying income, over £50,000, however much went on expenses.

• Counts: self-employment income, property income, and your share of the income from a property you own jointly.
• Doesn't count: employment income taxed through PAYE, your share of a partnership's profit, dividends (including from your own company), the State Pension and private pensions.

Who is exempt

Some people are exempt automatically. They include anyone with:

• qualifying income of £20,000 or less;
• no National Insurance number before the start of the tax year;
• and, until April 2027, a 2024 to 2025 return that used averaging relief, qualifying care relief (for example as a foster or kinship carer), or the trusts and estates or residence pages.

Trustees, personal representatives and Lloyd's members are also exempt. Anyone else has to apply, and HMRC only accepts that you're “digitally excluded” because of your age, health or disability, religious beliefs, or no internet access at home, at work or anywhere suitable. Having filed on paper before, not knowing accounting software, having few records or the extra time and cost are not accepted on their own. You apply by phoning or writing to HMRC's Self Assessment helpline; HMRC aims to answer within 28 days, and you can appeal within 30 days.

What you have to do

1. Sign up

You sign up on GOV.UK, or your accountant signs you up. You'll need your business name, address and trade, and its start date if it began in the last 2 tax years.

2. Keep digital records

Each piece of income and each expense goes into software that works with Making Tax Digital, with its amount, the date, and a category (the same categories as Self Assessment). There's a separate set of records for each sole-trade business, and one for all your UK property. A few things make it lighter:

• With turnover under £90,000, a sole trader can simply mark each item as income or expense.
• Shops can record their daily takings instead of each sale.
• Spreadsheets are allowed, with bridging software to send them to HMRC. Records must move between products through digital links, such as linked cells or a file import, not by retyping or copying and pasting.

Keep the records for at least 5 years after the 31 January deadline.

3. Send a quarterly update every 3 months

An update is a summary of your income and expenses by category for the tax year so far, sent from your software. In HMRC's words, updates “are summaries, not tax returns”, and HMRC doesn't receive your receipts or invoices. If you had no income or expenses in a period, you still send one. A mistake is fixed in your records and goes into the next update. Joint landlords can leave joint expenses out of the quarterly updates.

4. File your tax return through the software

Your tax return is still due by 31 January after the tax year, but you file it from your Making Tax Digital software. For the April 2026 group, the first one, for 2026 to 2027, is due by 31 January 2028. Your 2025 to 2026 return is filed as normal by 31 January 2027.

The deadlines

If your accounts run from 1 April to 31 March, you can use calendar quarters instead (to 30 June, 30 September, 31 December and 31 March) with the same deadlines. You have to choose before your first update, and can't change for the rest of the tax year.

Penalties

Late updates and returns: points, then £200

Each missed deadline earns one penalty point, even if you have several businesses. At 4 points you pay a £200 penalty, and another £200 for every deadline you miss after that. Below 4, each point expires 24 months after the missed deadline; at 4, they're cleared after 12 months of meeting every deadline, once everything due in the previous 24 months has been sent.

For the 2026 to 2027 tax year, HMRC won't give penalty points for late quarterly updates. A late tax return for that year still gets one, and you still have to send every update before you can file.

Paying late

The 10% a year runs until the tax is paid, for up to 2 years. In your first year under the new penalties, you have 30 days from the due date to pay or set up a payment plan before penalties start. Late payment interest is charged as before.

Software, and what it costs

HMRC doesn't provide software for Making Tax Digital for Income Tax. Its finder listed 159 products for sole traders and landlords on October 22, 2026, 37 of them with a free version, and HMRC warns that free products may have limits, such as a limited number of transactions. Some business bank accounts include it: Starling, for example, sends quarterly updates free from its sole trader account, with end-of-year returns “coming soon”. Choosing between the two biggest? See Xero vs QuickBooks Online compared.

Swipe the table sideways to see every column.

What an accountant charges

Firms that publish a price for Making Tax Digital work charge about £25 to £70 a month to send the updates and the tax return while you keep the books, and from about £38 with the bookkeeping done for you.

Swipe the table sideways to see every column.

For what UK accountants charge for bookkeeping and year-end accounts more generally, see how much bookkeeping costs in the UK.

If you start in April 2027

1. Check your 2025 to 2026 turnover. Add your self-employment and property income before expenses. Over £30,000 means you start on 6 April 2027.
2. File your 2025 to 2026 return as normal, by 31 January 2027.
3. Pick software, or bridging software if you'll stay on spreadsheets, and ask your accountant what they use.
4. Sign up for 2027 to 2028, or have your accountant do it.
5. Record every transaction from 6 April 2027. Your first update, for 6 April to 5 July 2027, is due by 7 August 2027, and your first return under the new rules by 31 January 2029.

Where NQD.ai fits

We keep books, so read this part with that in mind. Most of Making Tax Digital is record-keeping: every transaction in recognised software, with a date and a category, ready each quarter. That's bookkeeping. We keep your books monthly in your own Xero or QuickBooks Online account, both on HMRC's list, close them by the 5th business day and have a person review every close, so the figures for each update are ready weeks before the deadline. We don't send the updates or your tax return: you or your accountant send them from the same software.

Our UK plans are £219, £369 and £599 a month for up to 100, 300 and 700 transactions, with no VAT added. Our first 10 founding clients get 6 months free and their catch-up cleanup free.

Or see the bookkeeping offer in full and every NQD.ai price on one page.

The rules here come from GOV.UK and every price from the provider's own website, on October 22, 2026. HMRC updates this guidance often; if something has changed, email support@nqd.ai and we'll correct it.