Making Tax Digital for Income Tax Self Assessment came into force on 6 April 2026 for sole traders and landlords with a qualifying income above £50,000. We are now four weeks in, and the calls I am taking from small business owners fall into three buckets: people who have set everything up and are quietly getting on with it, people who think they have done it but actually have not, and people who are not sure whether MTD applies to them at all.
If you are in either of the last two groups, this post is for you. It is not a re-tread of the HMRC guidance. It is a practical run-through of what to do this month, how to choose the software, and where most small businesses are getting it wrong.
Quick recap: what MTD for Income Tax actually requires
The headline change is that quarterly digital updates replace the once-a-year scramble of a Self Assessment return. From 6 April 2026, if you fall in scope you must:
- Keep your business records digitally, in software that meets HMRC’s specification
- Send a quarterly summary of income and expenses to HMRC through that software
- Submit a final declaration after the tax year ends, replacing the old SA100 process
You can read the full requirements on HMRC’s MTD for Income Tax guidance ↗. The practical effect is that paper records, a shoebox of receipts, or a spreadsheet that you tidy up once a year are no longer enough on their own.
Does MTD for Income Tax apply to you in 2026?
There are three thresholds to know:
| Qualifying income | When MTD for Income Tax applies |
|---|---|
| Over £50,000 | From 6 April 2026 (now) |
| £30,000 to £50,000 | From 6 April 2027 |
| £20,000 to £30,000 | From 6 April 2028 |
Qualifying income is gross income from self-employment plus gross income from property, before expenses. Note that this is total turnover, not profit. A landlord with £45,000 in rental income and a sole trader sideline earning £8,000 hits the £50,000 threshold and is in scope from this April.
If you are unsure, HMRC has a quick eligibility check at find out if and when you need to use MTD for Income Tax ↗. It takes two minutes.
What you need to do this month
If you are in scope and have not yet acted, the next 30 days matter. Your first quarterly update covers 6 April to 5 July 2026, and it is due by 5 August 2026. That sounds far away. It is not, once you account for setting up software, importing your existing records, and figuring out how categorisation works in practice.
Here is a sensible order of operations for May.
Week 1: Confirm you are in scope. Use the HMRC checker. If you are above £50,000 from self-employment plus property, you are in. If you only crossed the threshold late in the 2024-25 tax year, the same rule applies.
Week 2: Choose your software. This is the biggest decision and the one most people get wrong by rushing. More on this below.
Week 3: Sign up and connect. You sign up to MTD for Income Tax through your software, not directly with HMRC. The software handles the authorisation. You will need your Government Gateway credentials to hand.
Week 4: Bring records up to date. Import or enter income and expenses from 6 April onwards. If your bookkeeping has been monthly, you have caught a break. If it has been quarterly or worse, this is the painful bit.
Choosing MTD-compatible software: what actually matters
HMRC publishes a list of recognised software at choose the right software for MTD for Income Tax ↗. There are dozens of products on it. They are not interchangeable. Here is what to actually look for.
Does it match how you already work?
The cheapest software in the world is useless if you will not use it. If you currently work in spreadsheets, look for tools that support spreadsheet imports and bridging software. If you already use Xero, QuickBooks Online, or FreeAgent for VAT or general bookkeeping, check whether your existing subscription tier covers MTD for Income Tax. In many cases it does, at no extra cost.
Sole trader vs landlord vs both
If you have multiple income streams (a trade plus rental property, for example) you need software that can keep them as separate businesses inside one MTD return. Not all tools do this cleanly. If you have one business and no property, almost any product on the HMRC list will do.
Bank feeds and receipt capture
The categorisation work is what eats time. Software with a reliable bank feed and a working mobile app for photographing receipts will save you hours per quarter. Software without those features means manual entry every quarter, which is exactly what MTD was meant to reduce.
Agent access
If your accountant submits on your behalf, they will need agent access to the software. Confirm before you sign up that your accountant is set up to use it. Switching accountant-side after the fact is a hassle.
Cost over a full year, not month one
Many MTD products advertise an introductory price for the first three months. Look at the standard monthly cost and multiply by twelve. For most sole traders, you should expect to pay between £10 and £30 a month for software that is genuinely fit for purpose. Free options exist; they tend to require more manual work and fewer integrations.
The “best time to buy tax software” question
This is one of the more common searches I see in our site analytics, and the honest answer is “before you need it.”
The worst time to buy tax software is two weeks before your first quarterly update is due. You will not have time to learn the categorisation, fix imports, or sort out edge cases. The deadline panic pushes people to pick the first product that looks like it will work and to skip the bit where they actually try it on real data.
The best time, for anyone in scope from April 2026, was January or February. The second best time is now. Buy it this month, set it up, run a deliberate test on your first month of records, and you will be ready for the August deadline with weeks to spare. If you wait until July, you will be choosing under pressure, and the cost of choosing badly compounds for years.
This is the same logic we covered in why April is the best time to invest in custom software: aligning a system change with the start of a financial year is much easier than retrofitting one halfway through.
Where MTD breaks down for businesses with messy operations
MTD for Income Tax is, on paper, an accounting change. In practice, it exposes operational mess. The pattern I see most often runs like this.
A sole trader has been running their books in a spreadsheet, with invoices in Word, jobs tracked in a notebook, and receipts in a glovebox. They buy MTD-ready software in May, hoping it will be a tidy upgrade. Three weeks later, they are paying for the software, but they are still entering everything manually because:
- The bank feed pulled in transactions, but the categorisation is wrong on most of them
- Half the receipts in the glovebox are faded or missing
- Job income does not match invoices, because some clients paid late and some paid the wrong amount
- The “VAT-ish” feel of last year’s records does not survive contact with proper accounting
The MTD software is not the problem. The underlying record-keeping was already fragile, and MTD has just turned a private problem into a quarterly deadline. We covered the broader version of this in signs your business has outgrown its software.
The fix is not heroic. It is to clean up one quarter at a time, starting with the one you are about to file, and to build the habit of weekly (not quarterly) reconciliation. The single biggest predictor of an easy MTD experience is whether you can categorise your transactions inside a week of them happening.
Sage 50 users: special note
If you are running Sage 50, the Sage 50cloud subscription supports MTD for Income Tax for sole traders, but the experience varies depending on your version. Older perpetual-licence Sage 50 installs are not supported for MTD for Income Tax in their current form; you will need to be on a current cloud-connected subscription.
If you have been quietly putting off the upgrade, MTD for Income Tax is the moment that decision lands. We covered the wider question of whether Sage 50 is still the right tool for your business in signs your business has outgrown Sage 50.
A simple readiness checklist
If you cannot tick all five by the end of May, you are at real risk of missing the 5 August deadline. Penalties for late MTD submissions follow a points-based system, similar to MTD for VAT. They are survivable, but they are also avoidable.
When MTD is the trigger to fix the bigger problem
For some businesses, MTD for Income Tax is just the prompt to upgrade an accounting tool. For others, it is the moment they realise the underlying setup is broken. If your business runs on a stack of spreadsheets, manual invoicing, and a once-a-year accountant scramble, MTD will turn that into a quarterly fire drill.
The right response is not to wedge MTD software on top of the same mess. It is to look at the operational layer underneath: how you capture jobs, raise invoices, track expenses, manage stock, and connect that data to your accounting system. We covered the move from spreadsheets to a proper system in from spreadsheets to software, and the wider question of when custom software starts to pay back in why small businesses need custom software.
For most sole traders and small landlords, an off-the-shelf MTD product on the HMRC list is the right answer. For businesses with more complex operations, where the accounting tool is being asked to do far more than accounting, the MTD requirement is a useful forcing function to fix the wider problem properly.
Frequently asked questions
When is the first MTD for Income Tax submission due?
The first quarterly update covers 6 April 2026 to 5 July 2026 and is due by 5 August 2026. The pattern then repeats every quarter, with a final declaration due by 31 January following the end of the tax year.
I am below £50,000. Can I ignore MTD?
For 2026-27, yes, you are not required to use MTD. From 6 April 2027, the threshold drops to £30,000. From 6 April 2028 it drops again to £20,000. Many businesses choose to switch to MTD-compatible software ahead of their threshold so that the change is gradual rather than sudden. HMRC’s MTD for Income Tax collection ↗ has the up-to-date timetable.
Do I need to change accountant?
Probably not. Most UK accountants are now MTD-ready. The thing to confirm is whether your current accountant supports the specific software you are choosing. If not, either pick different software or check whether they have a preferred product that works for your situation.
What about MTD for VAT, is anything changing there?
MTD for VAT continues as before. The current rules are documented in HMRC’s MTD for VAT collection ↗. If you are already MTD-VAT compliant, your VAT process does not change because of MTD for Income Tax. They are separate requirements that often share the same software.
Can I keep using a spreadsheet?
Only if you also use bridging software that connects the spreadsheet to HMRC and keeps a digital audit trail. A spreadsheet on its own is not compliant. For most sole traders, moving fully to MTD-compatible software is simpler than maintaining a spreadsheet plus bridging tool.
What happens if I miss a quarterly update?
MTD for Income Tax uses a points-based penalty system. You accumulate points for late submissions, and once you cross a threshold (which depends on filing frequency) HMRC issues a financial penalty. Repeated lateness compounds. Catching up early in the cycle is much cheaper than waiting.
Is there a difference between sole trader and landlord MTD?
The mechanics are the same, but income and expense categories differ, and you must keep records separately for each business or property income source. Software that does not separate these cleanly will create headaches at year end.
Worth a conversation?
If MTD for Income Tax is the prompt that has made you look hard at how your business actually runs, and you are realising the spreadsheets and manual workflows underneath are the real problem, that is the kind of work I do. I help small businesses replace fragile, patchwork setups with software that fits their workflow and that I manage on an ongoing basis, so MTD becomes a quiet quarterly task rather than a recurring crisis.
Get in touch and tell me what your setup looks like. I will give you a straight answer on whether off-the-shelf MTD software is enough, or whether the underlying operational layer needs sorting first.