Making Tax Digital is about to move from something many small businesses have heard about to something they actually have to deal with.
From 6 April 2026, sole traders and landlords with total annual qualifying income from self-employment and property over £50,000 must use Making Tax Digital for Income Tax. The threshold then drops to £30,000 from April 2027 and £20,000 from April 2028. HMRC describes this as a new way for sole traders and landlords to report income and expenses.
That sounds simple enough, but the practical change is much bigger than many people realise.
For years, a lot of sole traders and landlords have worked around one major annual deadline. Keep records, send everything to the accountant, file the Self Assessment return, pay the bill, then move on.
Making Tax Digital changes that rhythm.
Instead of treating tax as a once-a-year exercise, people in scope will need to keep digital records and use compatible software to send updates to HMRC during the year. HMRC’s own guidance says quarterly updates must be sent for each self-employment and property income source every three months.
That is the real shift.
It is not just a software change. It is a behaviour change.
The biggest mistake: income is not profit
One of the most dangerous misunderstandings around Making Tax Digital is the threshold.
The £50,000 threshold is about qualifying income from self-employment and property. It is not simply taxable profit after expenses.
That means someone could have income above the threshold but profit well below it.
For example, a sole trader might bring in £62,000 but have £18,000 of expenses. They may think they are “under £50k” because their profit is £44,000. But for Making Tax Digital, the income figure is the starting point.
That distinction matters.
It could pull people into the rules earlier than they expected.
Who should be paying attention now?
The first wave will mainly affect people who already have meaningful self-employed or property income.
That includes sole traders, consultants, freelancers, tradespeople, landlords, online sellers, creators, personal trainers, beauty businesses, CIS subcontractors and anyone with enough qualifying income from self-employment or property.
Landlords need to be especially careful. Making Tax Digital is not only for people who think of themselves as running a “business”. Property income can count, even where the landlord only owns one or two properties.
The issue is not whether the activity feels formal.
The issue is whether the income brings you into scope.
What actually changes?
The biggest practical changes are:
- • You need digital records.
- • You need compatible software.
- • You need to submit updates during the tax year.
- • You still need to finalise the year-end position.
HMRC’s developer guidance describes the annual Making Tax Digital cycle as including four quarterly updates and a final declaration.
That means the traditional annual rush becomes a more regular reporting cycle.
For organised businesses, this could actually be positive. Cleaner records, fewer surprises, and less January panic.
For people who leave everything until the end of the year, it could be painful.
Why this matters before the first deadline
The worst time to discover you need better records is after the tax year has already started.
A lot of people will assume this is something to sort later. That is risky.
Anyone close to or above the threshold should know:
- • Whether they are likely to be in scope.
- • Which income sources count.
- • Whether their current record-keeping is good enough.
- • Whether their software is compatible.
- • Whether their accountant is ready to support them.
- • How quarterly updates will fit into their normal working life.
This is especially important for people who still rely on spreadsheets, paper receipts, bank statement exports, shoeboxes, or once-a-year bookkeeping.
Spreadsheets may still have a role in some setups, but the process must fit the Making Tax Digital requirements. The key point is that “I have records somewhere” is not the same as being ready.
The accountant problem
Many accountants and bookkeepers will be dealing with hundreds of clients asking the same questions at the same time.
The clients who act early will get the better experience.
The clients who wait until the last minute may find that their accountant cannot clean up a full year of poor records quickly enough.
This is where Making Tax Digital becomes less about HMRC and more about operational discipline.
Clean records will matter.
Regular habits will matter.
Choosing the right software will matter.
And asking the right questions early will matter.
What should you do now?
Start with the basics.
- • Work out your qualifying income from self-employment and property.
- • Check whether you are likely to cross the £50,000 threshold.
- • Speak to your accountant or tax adviser about your expected Making Tax Digital start date.
- • Review how you currently keep records.
- • Check whether your software is Making Tax Digital-compatible for Income Tax, not just VAT.
- • Separate business and personal transactions where possible.
- • Start behaving as though regular record-keeping is already required.
The point is not to panic.
The point is to stop treating tax admin as something that only happens once a year.
Final thought
Making Tax Digital will not affect everyone immediately, but it will affect a large number of sole traders and landlords over the next few years.
The people who struggle most will not necessarily be the people with complicated tax affairs.
They will be the people who leave the habit change too late.
The smart move is to prepare before the rules force you to.