Making Tax Digital for Income Tax: Your Sole Trader Prep Checklist Before April 2026

Making Tax Digital for Income Tax Self Assessment (MTD ITSA) became mandatory from 6 April 2026 for sole traders and landlords with combined gross income over £50,000, based on figures from 2024/25 tax returns, according to GoCardless's guide. If that's you, the days of a single annual Self Assessment return are over — replaced by digital record-keeping and quarterly updates.

Who's affected and when

• From April 2026: sole traders and landlords with taxable income over £50,000 (combining trading and property income if you have both).
• From April 2027: the threshold drops to £30,000, pulling in a much larger group.
• Below £30,000, you remain on the current Self Assessment system for now, per Mercer & Hole's breakdown.

What MTD actually requires

Once you're in scope, you must:

• Keep digital records of income and expenses using MTD-compatible software.
• Submit quarterly updates to HMRC rather than one annual return.
• Submit a final declaration by 31 January following the end of the tax year, similar to the current Self Assessment deadline.

Step-by-step preparation checklist

1. Check whether you're in scope using your 2024/25 tax return figures — combine trading and rental income if you have both.
2. Choose MTD-compatible software. Spreadsheets can still work if paired with "bridging software," but dedicated accounting apps generally make quarterly updates easier — Sage's guide has a comparison of options.
3. Sign up through HMRC — note that HMRC's MTD sign-up service will be offline from 5pm Friday 10 July to 9am Monday 13 July 2026 for planned maintenance, so don't leave registration to that exact window.
4. Diarise your quarterly deadlines: updates are due 5 August, 5 November, 5 February and 5 May each year.
5. Start digital record-keeping now, even before your first mandatory quarter, so you're not scrambling to reconstruct months of receipts.
6. Reconcile bank transactions regularly rather than in one annual batch — quarterly reporting rewards doing this monthly.
7. Budget for software costs — most MTD-compliant packages run a modest monthly subscription, an ongoing cost sole traders haven't had to factor in before.
8. Talk to your accountant early if you use one — many are proactively moving clients onto compatible software ahead of the deadline.

Why the phased rollout matters

Rolling out MTD in stages by income size gives HMRC — and taxpayers — a chance to work through issues with the highest earners first before the £30,000 threshold pulls in a much bigger population from April 2027. If you're currently just under £50,000 but trending upward, it's worth preparing now rather than waiting to be forced in at the lower threshold.

International comparison

Digital tax reporting isn't unique to the UK — Australia's Single Touch Payroll system has required real-time digital reporting from employers for years, and several EU states are moving toward e-invoicing mandates for VAT. The UK's approach is broadly in line with this shift toward more frequent, digital-first tax reporting rather than an outlier.

Key Numbers

• £50,000 — income threshold for mandatory MTD from April 2026
• £30,000 — threshold from April 2027
• 4 — quarterly updates required per tax year
• 31 January — final declaration deadline, same as current Self Assessment

Sources

• GoCardless: The sole traders' guide to MTD 2026
• Mercer & Hole: Making Tax Digital 2026 complete guide
• Sage: A sole trader's guide to MTD for Income Tax
• MoneySavingExpert: Making Tax Digital

Educational content only — not financial advice.