From 6 April 2026, significant changes to the way sole traders and landlords report their income to HMRC will begin to take effect. If you’re self-employed or earn income from rental property, this is something you’ll need to be aware of well in advance.
The changes form part of HMRC’s ongoing Making Tax Digital (MTD) programme, which is designed to modernise the UK tax system by moving record-keeping and reporting fully online. While MTD has already applied to VAT-registered businesses for several years, it is now being extended to Income Tax Self Assessment (ITSA).
Because sole traders and landlords make up a large proportion of our customers, this update is particularly relevant. Whether you manage a portfolio of rental properties or run a small independent business, preparing early will help ensure a smooth transition.
What Is Making Tax Digital for Income Tax?
Making Tax Digital for Income Tax (often referred to as MTD for ITSA) changes how certain individuals keep records and submit tax information to HMRC. Instead of filing a single annual Self Assessment tax return, affected taxpayers will need to keep digital records and submit updates to HMRC throughout the year. The official GOV.UK guidance explains the full scope of the programme.
The core aim is to reduce errors, improve accuracy and give taxpayers a clearer view of their tax position during the year rather than after it ends.
Who Will Be Affected and When?
The rollout will happen in stages. From 6 April 2026, MTD for Income Tax will apply to sole traders and landlords with qualifying income over £50,000 in the 2024–25 tax year. Qualifying income means gross income from self-employment and/or property before expenses are deducted.
The government has confirmed the phased approach as follows:
- April 2026: Income over £50,000
- April 2027: Income over £30,000
- April 2028: Income over £20,000
You can read the latest government announcement on the phased mandation here.
If your income crosses the relevant threshold based on your most recent tax return, HMRC will notify you that you are required to join the scheme.
What Will Actually Change?
The most noticeable change is the move away from one annual Self Assessment submission. Instead, affected taxpayers will be required to:
- Keep digital records using compatible software
- Submit quarterly updates of income and expenses
- Complete a final declaration at the end of the tax year
More details on the step-by-step process are available here.
Quarterly updates are summaries rather than full tax calculations. The final declaration effectively replaces the current annual tax return and confirms the end-of-year position.
Digital Record-Keeping Becomes Mandatory
One of the most important aspects of the change is that record-keeping must be digital. Paper records or manual spreadsheets alone will not be sufficient unless they are linked to HMRC-compatible software.
This means many sole traders and landlords will need to adopt bookkeeping software if they are not already using it. For some, this will be an adjustment. For others who already keep digital accounts, the transition may be relatively straightforward.
Although this adds an extra administrative requirement, it can also improve financial visibility. Regularly updated records often make it easier to monitor cash flow, track expenses and plan ahead.
What Does This Mean for Landlords?
Landlords with rental income above the threshold will need to report property income digitally in the same way as sole traders report business income. If you own multiple properties, you will still be able to consolidate reporting, but accurate digital record-keeping will be essential.
This is particularly important for landlords who may also be self-employed, as qualifying income is based on combined totals.
For landlords reviewing their compliance obligations, it may also be a good time to review wider risk management and protection arrangements, including appropriate cover such as specialist landlord insurance. Taking a proactive approach now can help avoid disruption later.
What About Penalties?
As with other tax obligations, failure to comply can result in penalties. HMRC is introducing a points-based penalty system for late submissions under MTD. Repeated missed deadlines can lead to financial penalties once a points threshold is reached. Up-to-date information about penalties and compliance can be found via GOV.UK here.
The best way to avoid issues is early preparation. Waiting until just before April 2026 could create unnecessary pressure.
Practical Steps for Preparing Now
Although April 2026 may seem some way off, preparation is advisable, particularly if your income is close to the threshold. Consider reviewing your current bookkeeping process, exploring MTD-compatible software options and speaking to your accountant about how quarterly reporting will work in practice.
Early adoption is possible for those who wish to join the scheme voluntarily before it becomes mandatory. This can provide a useful opportunity to familiarise yourself with the system without the pressure of a compliance deadline.
Getting Ready for April 2026
Making Tax Digital for Income Tax represents one of the most significant changes to Self Assessment in recent years. For sole traders and landlords, the key differences are digital record-keeping and quarterly reporting instead of a single annual submission.
While the new requirements will involve adjustment, they are intended to improve accuracy and give taxpayers a clearer, more up-to-date understanding of their financial position.
If you are a sole trader or landlord likely to be affected, reviewing your processes now and seeking professional advice where necessary will help ensure you are ready when the new rules take effect on 6 April 2026.
At Ashburnham Insurance, we work closely with sole traders and landlords across the UK, helping them safeguard what matters most while they focus on running their business or managing their properties. If you’d like to review your cover or discuss your current arrangements, our team is always happy to help.