The Government has confirmed that Making Tax Digital (MTD) for Income Tax will apply to sole traders and landlords earning over £20,000 a year.
This latest extension means that an additional 900,000 sole traders must adopt digital record-keeping and quarterly tax submissions by this deadline.
Who is affected and when?
Mandating digital record-keeping allows HMRC to enhance compliance and streamline reporting for taxpayers and the tax authority, reducing errors and improving efficiency.
Over the next few years, more sole traders will be brought into the MTD system.
Here is when different income thresholds will come into effect:
From April 2026 – Sole traders and landlords with income over £50,000 must comply.
From April 2027 – The threshold reduces to £30,000.
From April 2028 – Those earning over £20,000 will also be required to join.
You will need to plan ahead to ensure your business is ready for these changes before they are enforced.
How should you prepare?
Sole traders should take the following steps to ensure compliance before the deadline:
Adopt digital record-keeping – Research and select HMRC-approved accounting software that best fits your needs.
Understand quarterly reporting – Rather than submitting a single annual return, you must provide tax updates every three months, followed by a final declaration. Keeping up-to-date financial records will help to avoid errors and late submissions.
Seek professional guidance – An accountant can clarify compliance and help optimise tax efficiency. Their expertise can make the transition less stressful.
Stay informed – HMRC may refine its requirements, so signing up for relevant updates and attending webinars will ensure you remain prepared.
Taking proactive steps now to prepare for mandatory digital record-keeping will make your transition to MTD smoother.
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