From April 2026, Making Tax Digital (MTD) will change how sole traders and landlords file their Self Assessment tax return. Significant changes are taking effect in one of the most substantial shifts in tax reporting for some time.
The main point of the MTD 2026 changes is that the annual Self Assessment return will be replaced with quarterly digital submissions through HMRC-approved software. As such, this could fundamentally change how you manage your business finances and interact with HMRC.
At Hamlyns, we’re helping businesses and landlords across Surrey prepare for these changes well in advance. With proper planning and the right systems in place, the transition can be smooth, straightforward and even beneficial, but leaving it to the last minute could result in penalties that you didn’t prepare for, not to mention unnecessary stress and excessive admin. This guide breaks down exactly what’s changing, when it takes effect, and the steps you need to take now to ensure MTD compliance.
What Is Making Tax Digital for Income Tax?
Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) requires individuals to manage their tax records digitally and submit regular updates ot HMRC as part of their digital programme.
Under MTD for Income Tax, you will need to:
- Maintain digital records of business income and expenses
- Submit quarterly updates to HMRC
- Use HMRC-compliant accounting software
- Submit an End of Period Statement and Final Declaration at the end of the tax year
This initiative aims to streamline and simplify ongoing tax reporting, reduce errors and end-of-year pressure, and provide more timely information to HMRC about income and expenses.
MTD does not change tax rates, allowances or payment dates.
This represents a fundamental shift from the current HMRC Self Assessment return system, where many sole traders, landlords and individuals with self-employment and property income file just one annual return before the deadline, often with their accountant’s assistance.
Who Will Be Affected From April 2026?
From the start of the 2026/27 tax year, MTD for ITSA will be introduced to the following people:
- Sole traders
- Landlords
- Individuals earning income from property and self-employment
Anybody with total gross income before expenses (what HMRC dubs qualifying income) exceeding £50,000 must comply. This figure will need to be based on your 2024/25 tax return. This is the critical first MTD 2026 deadline, now just months away.
The distinction of qualifying income is important here because if it falls below a certain threshold, joining MTD isn’t compulsory (yet). Qualifying income (gross income before expenses) includes:
- Turnover from self-employment
- UK rental income
- Relevant overseas property income
If your qualifying income is below £50,000, you won’t be required to join MTD in 2026. MTD is, however, being introduced step by step, with the following thresholds coming into play in future tax years:
- From 6 April 2026: The threshold of £50,000 applies.
- From 6 April 2027: The threshold reduces to £30,000.
- From 6 April 2028: The threshold lowers further to £20,000 (subject to final legislation).
These thresholds are based on gross income and not profit. If your business turnover is £55,000, but your profit after expenses is only £30,000, you’ll still need to apply for MTD in 2026. If you’re a landlord with rental income of £60,000 but mortgage payments and other liabilities reduce your taxable profit, MTD still applies.
Partnerships are also affected. If a partnership has business income exceeding the relevant threshold, all partners will need to comply with MTD requirements.
Quarterly Reporting Deadlines
For clarification, the new required quarterly updates through HMRC software are not tax calculations. They are summaries only, and don’t calculate the amount of tax you owe, they simply update HMRC on your financial position.
Each tax year is divided into four reporting periods. For the 2026/27 tax year, the quarters run:
- 6 April to 5 July (deadline: 7 August 2026)
- 6 July to 5 October (deadline: 7 November 2026)
- 6 October to 5 January (deadline: 7 February 2027)
- 6 January to 5 April (deadline: 7 May 2027)
Missing a quarterly deadline will trigger penalty points under HMRC’s new points-based system.
See HMRC’s page on Making Tax Digital timelines for more information.
End of Period Statement and Final Declaration
After the tax year ends, you’ll prepare an End of Period Statement (EOPS), which finalises your income and expenses figures. Following this, you’ll submit a Final Declaration, that effectively replaces the standard annual SA tax return, confirming the information is complete and correct.
The Final Declaration must be submitted by 31st January following the end of the tax year, maintaining the current Self Assessment deadline.
The New HMRC MTD Penalty System
MTD introduces a points-based penalty regime. In summary:
- Each late quarterly submissions triggers a penalty point.
- Once you accumulate four points, you’re automatically issued a £200 fine.
- Every subsequent missed deadline adds another £200 fine.
- Points only reset after you achieve 12 months of compliance for quarterly obligations and that all submissions due in the preceding 24 months have been made.
- Not only could you be subject to fines, but also interest on late-paid and overdue tax, before you even have to deal with a letter from HMRC.
The message is clear: under MTD, staying on top of deadlines is imperative.
HMRC Digital Reporting: A Plan of Action
With April 2026 approaching rapidly, here’s our recommended action plan:
- Determine whether you’ll be affected in 2026 by calculating your qualifying income
- Review your current record-keeping methods and identify gaps
- Research, choose and purchase MTD-compatible software options
- Choose and purchase your MTD-compatible software
- Begin using it to record all income and expenses, even before MTD formally applies
- Ensure you understand how to categorise transactions correctly
- Consider training for yourself or staff on using the new software
Before 6th April 2026:
- Have your digital systems fully operational and tested
- Transition any outstanding records into your digital system
- Set up calendar reminders for quarterly submission deadlines
- Brief your accountant or bookkeeper on your MTD setup if you use external support
From 6th April 2026:
- Maintain digital records from day one of the tax year
- Keep on top of regular data entry (suggest either weekly or monthly)
- Submit each quarterly update before the official reporting deadline
- Monitor HMRC correspondence for any queries or compliance issues
How Hamlyns Can Support Your MTD Journey
The transition to MTD doesn’t have to complicated or daunting. At Hamlyns, we’re helping sole traders, landlords, and small businesses everywhere prepare for MTD imminently and in the future. We can help you choose the right MTD accounting software, migrate your existing records, conduct quarterly reviews to ensure submission validity, as well as offer comprehensive bookkeeping and MTD submission services.
If you’re an existing client who needs an MTD setup that integrates seamlessly with your current accounting and tax planning arrangements, we are also happy to advise.
The April 2026 deadline is fast approaching, so don’t wait until HMRC sends you a reminder or, worse, until you’ve unknowingly missed the first quarterly deadline and face an unexpected penalty.
Contact Hamlyns today to schedule a consultation with one of our experts.
