MTD Deadlines 2026: When Do Sole Traders Need to Comply?

Making Tax Digital for Income Tax becomes mandatory in April 2026 for some sole traders, with more businesses included from April 2027. Here's exactly when the deadlines apply to you.

Quick Answer

April 2026: MTD applies if your total self-employment or property income is over £50,000.

April 2027: The threshold drops to £30,000.

Income is measured from your previous tax year when you cross the threshold.

The Two Key Dates

HMRC is rolling out Making Tax Digital for Income Tax in two phases based on income thresholds. Your deadline depends on your total qualifying income.

Phase 1: April 2026

Who: Sole traders and landlords with total self-employment or property income over £50,000

When it starts: Tax year beginning 6 April 2026

First quarterly update due: 5 August 2026 (for the period 6 April - 5 July 2026)

Income measurement: Based on your 2024/25 tax year (the year ending 5 April 2025)

Phase 2: April 2027

Who: Sole traders and landlords with total self-employment or property income over £30,000

When it starts: Tax year beginning 6 April 2027

First quarterly update due: 5 August 2027

Income measurement: Based on your 2025/26 tax year (the year ending 5 April 2026)

How to Calculate Your Qualifying Income

Your qualifying income is the total of your self-employment income and property income before expenses. You calculate this by looking at your previous tax year's figures.

Example 1: Freelance Designer

Sarah invoiced £58,000 in the 2024/25 tax year from her design business. She has no property income.

Total qualifying income: £58,000
Deadline: April 2026 (over £50,000 threshold)

Example 2: Consultant with Rental Property

James earned £35,000 from consultancy and £18,000 from a rental property in 2024/25.

Total qualifying income: £53,000 (£35,000 + £18,000)
Deadline: April 2026 (combined income over £50,000 threshold)

Example 3: Growing Business

Rachel's coaching business earned £42,000 in 2024/25 and £38,000 in 2025/26.

2024/25 income: £42,000 (under £50,000)
2025/26 income: £38,000 (over £30,000)
Deadline: April 2027 (doesn't hit £50,000 in 2024/25, but over £30,000 in 2025/26)

What If Your Income Is Close to the Threshold?

If your income is close to £50,000 or £30,000, consider preparing for MTD regardless of whether you are technically required yet.

Why prepare early:

• Your income might increase and push you over the threshold mid-year
• Starting digital record-keeping now means you are not scrambling later
• You get the benefits of better organised records immediately
• Software becomes familiar before submissions are mandatory

If you earn £45,000 now, there's a reasonable chance you will be over £50,000 within two years. Building the habit of digital record-keeping early makes the eventual transition seamless.

What Compliance Actually Means

When your MTD deadline arrives, you need three things in place:

1. MTD-Compatible Software

Software recognised by HMRC that can submit updates directly to their systems. Spreadsheets alone don't meet this requirement.

2. Digital Records

Your income and expenses tracked digitally throughout the year. You can photograph paper receipts, but the records themselves must be digital.

3. Quarterly Submission Process

The ability to submit income and expense summaries to HMRC four times per year. Your software handles the technical side.

Your Preparation Timeline

At the time of writing this article (November 2025) you have time but should still begin preparation soon.

November 2025 - March 2026
Research software options. Choose one and start digital record-keeping by early 2026.

April 2026 - March 2027
Build 12 months of digital logging habits. Watch others in the April 2026 group complete their first submissions and learn from their experience.

April 2027
Your MTD requirement begins. First quarterly update due 5 August 2027.

What Happens If You Miss Your Deadline

Once MTD applies to you, you are legally required to comply. HMRC charges penalties for late or missing quarterly submissions.

Standard penalty for a late quarterly update: £200

Repeated late submissions: Penalties increase

Complete non-compliance: Higher penalties and potential further action from HMRC

The penalty structure is designed to encourage compliance rather than punish genuine mistakes. If you are late once because you forgot, you will pay £200 but can get back on track. Repeated lateness or ignoring the requirement entirely results in escalating consequences.

Action Steps

Here is what to do based on your situation:

If you are in the April 2027 group:

1. Review MTD software options in early 2026
2. Start digital record-keeping by spring 2026
3. Build the habit over 12+ months before mandatory compliance
4. Watch your income growth - crossing £50,000 moves you to the earlier group

If your income is under £30,000:

1. Monitor HMRC announcements for any threshold changes
2. If your income is growing toward £30,000, prepare voluntarily
3. Consider MTD-compatible software anyway for better record-keeping
4. No immediate action required, but stay informed

The Bottom Line

Your MTD deadline is determined by your income level in the tax year before compliance begins. Most sole traders with income over £50,000 will start in April 2026, with the threshold dropping to £30,000 in April 2027.

The key is knowing where you stand and preparing early enough that the transition feels manageable rather than rushed. Digital record-keeping takes a few weeks to become routine. Starting six months ahead of your deadline gives you time to build the habit without pressure.

Check your income from the 2024/25 tax year. If you are close to or over £50,000, your preparation should start now.