Following on from our earlier blog on Making Tax Digital, here’s a more detailed look at MTD for Income Tax self-assessment and what it means for sole traders and landlords.
From April 2026, sole traders and landlords with income over £50,000 will be required to submit quarterly reports to HMRC using digital software. This applies to anyone who had over £50,000 from the relevant income on their 05-04-2025 tax returns.
The first quarterly return will cover the April, May, and June periods and will need to be filed with HMRC by 7 of August 2026. The thresholds are based on gross income and not profit.
Example: If you have £15,000 in rental income and made £40,000 in sales through a sole trade, you will fall within the rules and will need to submit quarterly returns.
If your records are already kept digitally, there won’t be any major changes. The groundwork will already be done, and your software will split the information correctly. The additional step each quarter will be submitting a basic three‑month profit and loss report to HMRC.
It is possible that a taxpayer will have multiple quarterly submissions. Some clients with multiple trades or mixed rental portfolios may not realise this means:
There are no changes to the year‑end tax return process – these will still be submitted annually. The quarterly submissions will not include items such as capital purchases or year‑end accounting adjustments, so an annual return will still be required. As such, these quarterly submissions do not calculate tax.
Payment deadlines are also staying the same.
There are two possible reporting periods depending on whether you currently report to a 31 March or 5 April year-end. However, both have the same deadline. The first return will be one of the following:
Both will have a filing deadline of 07/08/2026
You will need to keep digital records in HMRC‑compatible software. As you all know, we use Xero accounting software. This is an approved digital software and Xero has been working with HMRC to make sure the submissions will work efficiently.
It’s also worth noting that, like VAT returns, agents can make submissions on behalf of clients. We will be offering two tiers of services:
We contacted all clients who had been caught when we sent out their 05-04-2025 tax return. However, if you would like to discuss how it affects you, please do reach out.
HMRC should also be contacting clients directly to inform them of the changes, which is usually in the form of a letter.
Additional notes:
The income thresholds will reduce to:
It is possible to apply for an exemption for reasons such as health, age, or location. These applications should be made as soon as possible if you believe you may qualify for digital exclusion.
We will work with all of our clients to guide you through the process and ensure you remain compliant. If you have any questions, please feel free to contact us.
Thanks for your continued support.
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Michael Broome
Email: michael@sidaways.co.uk
Tel: 01392 360008
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