With Making Tax Digital (MTD) starting from April-2026, sole traders and landlords with income over £50,000 are required to submit quarterly updates to HM Revenue and Customs (HMRC).
It is estimated that over 864,000 individuals have fallen under the scope of the new reporting criteria, this figure is based on the tax year 2023 to 2024. It is further estimated that another 1,000,000 will fall under the new tax rules from April 2027.
What does MTD entail?
MTD requires the use of ‘third party’ software. Whether you are a sole trader or a landlord, HMRC will require you to file online quarterly submissions using an approved software.
Using a software for keeping your accounting records can have many benefits for your business beyond just being a requirement from HMRC. For instance, it can help you streamline your processes and record keeping, so that when the final tax return is due to be completed it can be picked up by your accountant a lot quicker and easier as opposed to you having to send in your paper records which are at risk of being lost in the post. Such reports can also be used for cashflow purposes, enabling the taxpayer to retain an in depth view of their financial circumstances on regular basis.
When choosing the software, it is important to consider the other features the package offers, and which, will most benefit your business.
Registering for MTD
HMRC would have contacted you letting you know that you are now required to submit quarterly updates based on the figures on your 2024-25 tax return.
With that said, the HMRC notice, is just that a notice, however, it will be the taxpayer’s responsibility to register for MTD. If the taxpayer has not received such a letter from HMRC, that will not be considered an excuse for failing to register should there be a need.
It is important that the registration is done as soon as possible after the first day of the tax year and before the 7th August 2026 when the first quarterly submission is due. Do not leave registration until the last minute as HMRC are inundated with registrations and these will take time to come back in through the post.
Frequently asked questions
Do I need to do MTD if my income is below £50,000?
MTD is being phased in over the next couple of years, and will become mandatory for sole traders and landlords based on the below thresholds:
- 6 April 2026 – those with income above £50,000
- 6 April 2027 – those with income above £30,000
- 6 April 2028 – those with income above £20,000
Therefore, you may not be required to comply with MTD as of April 2026 just yet, however if your income falls within the above thresholds, you will be required to file quarterly submissions soon. If you would like to practice keeping digital records sooner, you can voluntarily register for MTD.
Am I required to file my tax return under the new MTD rules if I am in a partnership?
The simple answer is no, not yet. However, HMRC have indicated that partnerships may fall within the MTD scope soon.
Are there fines for wrong submissions and late filing?
Initially, no. However, once MTD is ‘fully’ active, fines may arise on a penalty points system. One penalty point for each later quarterly submission with a fine of £200 upon reaching 4 penalty points.
You may also be fined for using incompatible software for filing your quarterly submissions.
Would you like help with MTD?
Here at Kingston PTM, we understand that this can be very daunting and are here to assist you with choosing the best software that fits your needs, registering you for MTD and if required, filing your quarterly submissions.
Please contact us to arrange an initial free of charge meeting to discuss how MTD will impact you.
20th April 2026