Making Tax Digital (MTD) is changing how thousands of UK sole traders and landlords manage and report their income to HMRC. From April 2026, qualifying individuals with gross income above £50,000 from self-employment and property have been required to follow the new digital reporting rules.
But there is another important development: HMRC has started signing up eligible taxpayers who have not registered themselves. This means ignoring the changes will not necessarily keep you outside the system.
Understanding who is affected, how quarterly reporting works and what steps to take now can help you avoid unnecessary disruption.
Who Needs to Follow Making Tax Digital?
MTD for Income Tax initially applies to sole traders and landlords whose combined gross income from self-employment and property exceeded £50,000 in the 2024–25 tax year. They are required to use the system from 6 April 2026, unless exempt.
One important detail is that HMRC looks at gross qualifying income before expenses, not net profit.
For example, someone earning £32,000 from self-employment and £21,000 from rental property has qualifying income of £53,000. This means they fall within the initial threshold, assuming the other conditions are met.
Employment income, dividends, pension income and other non-qualifying income sources do not count towards this threshold.
The rollout will continue in stages:
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April 2026: More than £50,000 qualifying income.
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April 2027: More than £30,000 qualifying income.
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April 2028: More than £20,000 qualifying income.
This means more small businesses and landlords will need to prepare over the next few years.
HMRC Automatic Registration: What Happens If You Do Nothing?
HMRC began signing up eligible individuals who had not registered themselves from September 2026. This process is being carried out in stages, using information HMRC already holds from previous tax returns.
If HMRC signs you up, you will receive notification explaining what to do next.
However, there is an important risk: HMRC may not have your most recent income details or changes in circumstances. For example, you may have stopped renting out a property, started a new business or changed your income sources since your last tax return.
You should therefore check your HMRC online account, confirm your income sources and make sure your registration details are accurate.
Rather than waiting for HMRC to contact you, taking control of the registration process can help you prepare properly.
What Changes Under Making Tax Digital?
MTD introduces a more structured approach to keeping financial records and reporting income. Affected taxpayers must use compatible software to maintain digital records of their self-employment and property income and expenses.
Instead of reporting everything once a year, they must send four quarterly updates to HMRC, summarising their income and expenses.
These updates are not four separate tax returns. They are periodic summaries designed to give HMRC more regular information about business and property income.
The annual Self Assessment process does not disappear. Taxpayers must still complete and submit one annual tax return, including any necessary adjustments and other income information.
The main requirements include:
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Maintaining digital income and expense records.
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Using HMRC-compatible software.
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Sending four quarterly updates.
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Reviewing figures and making year-end adjustments.
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Submitting the annual tax return and paying tax by the relevant deadline.
For the 2026–27 tax year, there are currently no penalties for missing quarterly update deadlines, although the reporting obligations still apply. This transitional arrangement should not be mistaken for a permanent exemption from compliance.
Preparing Your Business for the Changes
The best way to approach MTD is to prepare before reporting deadlines become a problem.
Start by reviewing your gross income from self-employment and property to establish when the rules apply. Then choose suitable software, organise your bookkeeping records and make sure all relevant transactions are recorded accurately.
If you currently rely on spreadsheets or manual bookkeeping, you may need to adapt your existing processes. Some taxpayers can continue using spreadsheets alongside suitable bridging software, provided the digital requirements are met.
It is also worth reviewing your bookkeeping regularly rather than leaving everything until the end of the year. Accurate records make quarterly reporting easier and reduce the risk of errors.
Looking Ahead: Why Professional Accounting Support Matters
Making Tax Digital is more than a change in how tax returns are submitted. It represents a wider shift towards digital bookkeeping, more frequent reporting and better financial record management.
For sole traders and landlords, this creates an opportunity to understand their financial position throughout the year rather than relying entirely on annual accounts and tax returns.
At Ten Piece Limited, we help business owners and landlords prepare for changing HMRC requirements through bookkeeping, digital accounting support, tax returns and ongoing compliance advice.
Getting organised now can make the transition considerably easier.
Don’t wait for an HMRC notification to start preparing. Understand your obligations, choose the right software and make sure your records are ready.
