The Biggest Change to Tax Reporting in 30 Years

Making Tax Digital (MTD) for Income Tax is a major HMRC initiative that will change the way self-employed people and landlords report their income and it’s already here.

If you’re a sole trader or landlord, this affects you. The annual Self Assessment tax return isn’t going away entirely, but the way you record and report your income throughout the year is changing significantly.

The good news: with the right support, it’s straightforward. We’re here to make sure you’re ready.

Making Tax Digital Explained by HMRC

Am I Affected?

MTD for Income Tax applies to self-employed individuals and landlords. Whether you need to act now, or prepare for the future, depends on your gross income from self-employment and property combined:

From 6 April 2026 — Gross income over £50,000 (based on your 2024/25 tax return)

From 6 April 2027 — Gross income over £30,000 (based on your 2025/26 tax return)

From 6 April 2028 — Gross income over £20,000 (based on your 2026/27 tax return)

Important: your qualifying income is your gross income before expenses — not your profit. If you earn from both self-employment and property, the two figures are combined. Employment income, pensions, and dividends do not count towards the threshold.

Limited companies and partnerships are not currently in scope for MTD for Income Tax.

Find Out If MTD Applies to Me

What Actually Changes?

Instead of one annual tax return, you’ll report your income and expenses to HMRC four times a year using MTD-compatible software. Here’s what that looks like in practice:

  • Icon of a folder with a tab at the top, representing a computer file folder.

    Digital Record Keeping

    You’ll need to keep records of your income and expenses digitally using HMRC-approved software, no more shoeboxes of receipts.

  • Two white arrows forming a loop, pointing left and right, indicating a refresh or synchronization symbol.

    Quarterly updates

    Every three months, you’ll submit a simple summary of your income and expenses. These are not tax returns, they’re lightweight updates that spread your admin throughout the year.

  • Right turn arrow icon inside a circle.

    Final Declaration

    At the end of the tax year, you’ll still submit a final declaration by 31 January, but because your data is already in the system from your quarterly updates, it’s much less of a scramble.

Key Dates

6 April 2026

MTD becomes mandatory for sole traders and landlords with gross income over £50,000

7 August 2026

First quarterly update due (covering 6 April – 5 July 2026)

31 January 2027

Final Self Assessment return due for 2025/26 tax year (filed in the traditional way - the last one)

6 April 2027

MTD extends to those with gross income over £30,000

31 January 2028

First MTD Final Declaration due (covering 2026/27 tax year)

6 April 2028

MTD extends further to those with gross income over £20,000

What Happens if I Miss a Deadline?

HMRC is introducing a new points-based penalty system alongside MTD. Each missed quarterly update earns one penalty point, and once you reach four points, a £200 fine is issued. This resets once you’re back on track.

There is some breathing room: those joining MTD in April 2026 will not receive penalty points for late quarterly updates during their first 12 months. But this grace period does not apply to the Final Declaration, which carries full penalties from day one.

How Bucknall Whitehouse Can Help

MTD doesn’t have to be complicated. We work with sole traders and landlords across Sheffield and beyond to make the transition as straightforward as possible.

We can help you:

  • Check whether you’re affected and when your start date is

  • Choose the right MTD-compatible software for your situation

  • Set up your digital record-keeping from scratch

  • Manage your quarterly updates on your behalf

  • File your Final Declaration accurately and on time

  • Plan ahead as the income thresholds reduce in 2027 and 2028

whether you want us to take care of everything or just need guidance to set things up yourself, we’ll find an approach that works for you.

Frequently Asked Questions

  • No. The quarterly updates are just summaries of your income and expenses - they don’t trigger a tax payment. Your tax bill is still calculated once a year and paid by 31 January as normal.

  • No. MTD for Income Tax only applies to unincorporated landlords and sole traders - that is, individuals who own property or trade in their own name, not through a limited company.

  • You’ll need HMRC-approved MTD-compatible software to keep your records and submit updates. There are free and paid options available. We can advise on which is best suited to your situation and help you get set up.

  • Not yet, but the thresholds are coming down. If your gross income is between £20,000 and £50,000, you will be brought into MTD by 2028. It’s worth starting to think about digital record-keeping now so the transition is easier when the time comes.

  • Exemptions are available in limited circumstances - for example, if you genuinely cannot use digital tools. They must be applied for and approved by HMRC; they are not automatic. Get in touch and we can advise whether an exemption might apply to you.

  • HMRC may write to you if they identify that you’re in scope, but you should not rely on this. It is your responsibility to check whether MTD applies to you and to sign up before your start date.

Not Sure Where You Stand?

Let’s Talk.

MTD affects a lot of people differently depending on their income, setup, and how they currently manage their records. Fill in the form below and James will get back to you with clear, straightforward advice on what you need to do.