MTD for Income Tax is live: what it means if you’re earning over £50k as a sole trader

From 6 April 2026 the annual Self Assessment return disappeared for a large slice of UK sole traders. Gross income over £50,000 from self-employment or property puts you in the new system already: four quarterly digital updates to HMRC through approved software, instead of one scramble every January.

Here’s what changed, what you have to do, and how to handle it.

What is MTD for Income Tax, and is it actually new?

Making Tax Digital for Income Tax Self Assessment, MTD ITSA, was talked about for years. On 6 April 2026 it became law.

It requires businesses and landlords with qualifying income to keep digital records and update HMRC each quarter through compatible software, replacing one annual return with more frequent digital updates.

For sole traders who have filed the same way for years, this changes how you deal with HMRC rather than tweaking a form.

Are you in scope right now?

MTD ITSA applies from April 2026 to self-employed sole traders and landlords with qualifying income over £50,000. Qualifying income is gross income before expenses or allowances, not taxable profit.

Turnover is what counts, not what’s left after materials, fuel and tools. Turn over £55,000 and make £30,000 profit and you’re still in.

Rental income is added to trade income. A landlord and sole trader taking £20,000 in rent and £30,000 in gross revenue is under the threshold on each individually and over it on the combined £50,000.

Around 780,000 people with business or property income over £50,000 are expected to join MTD for ITSA from April 2026, a good number of them heating and plumbing firms.

The rollout timetable at a glance

April 2026: qualifying income over £50,000, based on 2024/25 figures
April 2027: qualifying income over £30,000, based on 2025/26 figures
April 2028: qualifying income over £20,000, based on 2026/27 figures

The 2028 threshold brings in a further 900,000 or so taxpayers, so most sole traders who aren’t in scope now will be.

HMRC sets your start date from your most recent Self Assessment return, using the 2024/25 return due on 31 January 2026 to decide whether you start in April 2026. Anyone HMRC believed to be in scope should have had a letter before 6 April 2026.

What does quarterly reporting actually involve?

Each quarterly update summarises your business income and expenses for that three-month period. No invoices, no receipts, just the totals in each category.

The four deadlines fall a month after each quarter ends:

Q1 (6 Apr to 5 Jul): due 7 August
Q2 (6 Jul to 5 Oct): due 7 November
Q3 (6 Oct to 5 Jan): due 7 February
Q4 (6 Jan to 5 Apr): due 7 May

The first update, covering 6 April to 5 July 2026, was due on 7 August 2026. The first Final Declaration, for 2026/27, is due on 31 January 2028.

After the four updates comes the Final Declaration, which replaces the old Self Assessment return as the point where you confirm full-year figures, claim allowances and finalise your tax position. The 31 January deadline hasn’t moved. What’s changed is that HMRC has already seen most of the picture by then.

The quarterly updates aren’t tax calculations. They’re summaries that tell HMRC where you are, and they don’t work out what you owe. You aren’t paying tax four times a year, you’re reporting four times a year.

Why a spreadsheet won’t cut it anymore

A shoebox of receipts and a spreadsheet filled in each January no longer meets HMRC’s requirements. Records have to sit in MTD-compatible software that talks to HMRC directly.

You can keep using a spreadsheet, but not on its own. You’d need bridging software to read the spreadsheet and submit the figures through a digital link, which is more moving parts rather than fewer.

Purpose-built software is cleaner for most firms: it logs income, categorises expenses, connects to your bank and sends the updates. That’s where Mucka fits, built around the work you do rather than for an office accountant.

The penalty system: what happens if you miss a deadline?

Each late quarterly update earns one penalty point, whether it’s a day late or three months late. Four points triggers a £200 fixed penalty.

There’s breathing room in year one. HMRC confirmed that taxpayers joining in April 2026 won’t receive penalty points for late quarterly updates for the first 12 months. After that, late submissions trigger points automatically.

The soft landing only pauses points for late quarterly updates. It doesn’t remove the duty to file, doesn’t cover a late Final Declaration, and doesn’t stop late payment penalties or interest.

In practice: file the quarterly updates even if you’re behind this first year, and don’t miss the Final Declaration on 31 January 2028.

The awareness gap, and why it matters

An IRIS Software survey found 31% of sole traders have never heard of Making Tax Digital, despite those earning over £50,000 now being legally required to submit quarterly digital updates.

Awareness is the easy part. The work is in the setup: software, bank feeds, records.

What you need to do right now

Work out your qualifying income. Add your gross self-employment turnover to any property income from your 2024/25 return. £50,000 or more puts you in scope now.

Choose MTD-compatible software. HMRC-approved software is required to submit quarterly updates, and spreadsheets alone aren’t enough. HMRC’s software finder on GOV.UK lists the recognised options.

Connect your bank account and record digitally. MTD software can pull transactions in and sort them into HMRC’s categories, which removes most of the manual entry. Set that up before you need it.

Register for MTD with HMRC. You’ll need your Government Gateway credentials and your UTR, and your software has to be authorised to connect to your HMRC account before you can submit anything. Registration takes time, so don’t leave it to the week of the deadline.

Know your first deadline. In phase one, the Q1 2026/27 update was due by 7 August 2026.

What if you’re not yet over the threshold?

Qualifying income below £50,000 but above £30,000 puts you in from April 2027, and above £20,000 from April 2028. Recording income and expenses digitally now means no catching up later.

Frequently asked questions

Does MTD change when I pay my tax?

No. Payment dates stay as they are under Self Assessment: 31 January for the balancing payment and first payment on account, 31 July for the second. Reporting changed, the payment schedule didn’t.

What counts as qualifying income?

Total gross income before expenses from all your self-employment trades and property businesses in a tax year. Dividends, savings interest, pensions, capital gains and PAYE wages don’t count.

Can I still use an accountant under MTD?

Yes. Your accountant can register on your behalf and file your quarterly updates through their own software. What’s changed is that everything has to flow through MTD-compatible systems, so tidying a spreadsheet and submitting through the HMRC portal is no longer an option.

What if my income drops below the threshold after I’ve joined?

The regulations let you stop complying when qualifying income falls below the threshold or the business ends permanently. To stop people joining and leaving repeatedly, the requirements only cease once qualifying income has been below the threshold for three successive years.

I’m a limited company, does this affect me?

No. Limited companies fall under Making Tax Digital for Corporation Tax, which has its own timeline. MTD ITSA applies to sole traders and landlords.

The threshold is only heading one way. Over £50k and you’re already in it. Under it for now and you’ve got time to get sorted.

Mucka takes the admin weight off heating and plumbing firms by logging jobs, tracking income and keeping records clean, so quarterly reporting isn’t a last-minute panic. Take a look at what Mucka does or get started today.