Making Tax Digital from April 2026: what business owners need to do now

If you are a sole trader or landlord, Making Tax Digital for Income Tax is no longer something to keep half an eye on. It went live from 6 April 2026 for the first group of taxpayers, and the businesses affected need to be keeping digital records and using compatible software now. The first wave applies where qualifying income from self-employment and property was over £50,000 for the 2024/25 tax year.

This matters because many people still assume MTD is mainly about VAT, or that it only affects larger businesses. It does not. For Income Tax, it is aimed at unincorporated businesses and landlords, and HMRC expects affected taxpayers to move from traditional Self Assessment record-keeping to a more digital process involving software, quarterly updates and an end-of-year submission.

For RVP clients, the practical point is simple: this is an admin and systems change first, and a tax filing change second. If your records are messy, spread across bank statements, spreadsheets, email folders and handwritten notes, MTD will expose that quickly. Businesses that are already keeping clean digital records will find the transition far easier.

What is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax is HMRC’s system for reporting self-employment and property income through compatible software rather than relying only on a once-a-year tax return process. Under the rules, affected taxpayers must use software to create and store digital records, send quarterly updates to HMRC, and then submit their tax return through MTD-compatible software.

That does not mean you will pay tax four times a year just because you are sending quarterly updates. The quarterly submissions are updates of income and expenses. Tax is still finalised through the year-end process, with tax due by 31 January following the end of the tax year.

Who needs to use Making Tax Digital from 6 April 2026?

From 6 April 2026, MTD for Income Tax is mandatory for sole traders and landlords whose qualifying income was more than £50,000 in the 2024/25 tax year. HMRC says qualifying income is based on the turnover from self-employment and property income before expenses, taken from the previous tax return.

The next two phases are already set out by HMRC:

• those with qualifying income over £30,000 in 2025/26 come in from 6 April 2027
• those with qualifying income over £20,000 in 2026/27 come in from 6 April 2028

That means even if you are not mandated this year, you may not be far off. Waiting until the last minute is a poor strategy, especially if your record-keeping is weak or you have multiple income sources.

What counts as qualifying income?

This is one of the areas where people get caught out.

For MTD for Income Tax, the key figure is qualifying income from self-employment and property, not profit after expenses. HMRC’s guidance makes clear that the test looks at the income shown on the return, and it can include income from more than one self-employment or property source.

If you jointly own a rental property, it is your share of the income that counts towards your threshold, not the whole property income. That distinction matters. Plenty of landlords hear ‘£50,000 property income’ and assume they are automatically in. Some are. Some are not. The answer depends on how the income is split and whether there are other self-employment or property sources in the mix.

Does MTD for Income Tax apply to limited companies?

No. Not in this form.

The current MTD for Income Tax rules are aimed at sole traders and landlords with qualifying income from self-employment or property. This is about Income Tax, not Corporation Tax, so it does not bring limited companies into MTD for Income Tax just because they own property or run a business.

That said, many business owners operate in more than one capacity. Someone may have a limited company and also have personally owned property income or a sole trade on the side. In that case, MTD may still apply to the individual even though their company is outside these particular rules.

This is exactly where confusion starts. People hear ‘I trade through a company’ and stop listening. That is risky. The right question is not ‘Do I have a company?’ The right question is ‘Do I personally have self-employment or property income that pushes me over the threshold?’

What do affected business owners need to do?

If you fall into the first wave, HMRC expects you to be doing three practical things.

1. Keep digital records

Affected taxpayers must use compatible software to create, store and correct digital records of self-employment and property income and expenses.

This is the real operational shift. It means moving away from a year-end scramble and towards record-keeping that is maintained throughout the year. For some businesses that will mean full bookkeeping software. For others, a spreadsheet-plus-bridging approach may work, but only if the software is genuinely compatible.

2. Send quarterly updates

MTD requires quarterly submissions to HMRC. HMRC’s timeline for the first mandated year includes these standard deadlines:

• 7 August 2026
• 7 November 2026
• 7 February 2027
• 7 May 2027

These updates are not the same as a final tax return. They are periodic summaries of income and expenses. But they still need to be done properly and on time.

3. Complete the year-end process through software

After the tax year, the taxpayer still needs to complete the final submission process through compatible software, and tax remains payable by 31 January following the end of the tax year.

What if you are not ready yet?

Then you need to deal with it now, not in the summer.

The issue for many businesses is not the filing itself. It is the groundwork:

• choosing suitable software
• setting up the chart of accounts or categories properly
• deciding who handles bookkeeping
• separating personal and business transactions
• making sure rental and trade records are complete from the start of the mandated period

HMRC says taxpayers should choose their software before signing up, and it also notes there are free and paid software options, including solutions that may work alongside spreadsheets if the provider supports MTD properly.

That means there is no serious excuse for doing nothing. The bigger risk is choosing badly, rushing the setup, or assuming your old process will somehow cope.

Are there any exemptions?

Yes, but too many people assume they qualify when they do not.

HMRC says there are exemptions from MTD for Income Tax, including cases of digital exclusion and certain categories of taxpayer or role. There are also temporary deferrals in some cases. But most business owners should be very careful here. ‘I do not like software’ is not an exemption. ‘I have always done it this way’ is not an exemption. If you think you may be exempt, the sensible move is to check properly rather than assume.

What about penalties?

This is one area where HMRC has given a little breathing space, but not much.

HMRC says that if you are required to use MTD for Income Tax from 6 April 2026, it will not apply penalty points for late quarterly updates in the first tax year, 2026/27. However, penalties can still apply for late tax returns and late payment of tax.

The biggest mistakes business owners are making

• assuming this only affects landlords with large portfolios
• looking at profit instead of income
• assuming a limited company means you are outside MTD
• leaving software decisions too late
• treating MTD as just another filing deadline

What should business owners do now?

For most RVP readers, the sensible action plan is straightforward.

• Check whether you are in the first wave by reviewing your 2024/25 return.
• Review how you keep records and fix weak processes now.
• Choose software that actually fits your business.
• Get internal responsibilities clear.
• Get support before deadlines start stacking up.

The first quarterly deadline for standard periods is 7 August 2026. That sounds manageable until summer arrives and you realise the underlying records were poor from April onwards.

Why this matters beyond compliance

There is a temptation to see MTD as one more HMRC admin burden. In fairness, for some businesses it will feel exactly like that.

But the businesses that handle it well may get a side benefit: better visibility over income, expenses and cash flow during the year. Businesses with cleaner books are usually easier to manage anyway.

So yes, this is compliance. But it is also an opportunity to stop running the business by hindsight.