If you’re a landlord or a sole trader earning over £50,000, the way you report your tax is about to change. From 6 April 2026, you’ll need to follow Making Tax Digital (MTD) for Income Tax. A year later, in April 2027, the rules will also apply to those earning £30,000 or more.
This means moving away from one big annual tax return and switching to digital record keeping with more frequent updates. It may feel like a big shift, but once everything is set up, many people find it actually makes life easier.
What Is MTD for Income Tax?
MTD is a new system that requires you to:
- Keep digital records of your income and expenses
- Send quarterly updates to HMRC using approved software
- Submit a final declaration at the end of the tax year
It’s designed to reduce mistakes and give a clearer picture of your tax position throughout the year.
Who Will It Affect?
You’ll need to follow MTD if your qualifying income from:
- Self‑employment, and/or
- Property (rental) income
is above the threshold for your start year.
A few things to remember:
- It’s based on qualifying income only, not your total income
- Self‑employment and rental income are added together
- PAYE income, pensions, dividends and partnership income don’t count
If you’re unsure whether you’ll be included, now is the right time to check.
What Will Change?
1. Digital records become the norm
Paper records and spreadsheets won’t meet MTD rules. You’ll need to use software that can record and send information to HMRC.
2. Quarterly updates
Instead of reporting once a year, you’ll send HMRC a summary every three months. These are not tax bills — just updates.
3. A final declaration
You’ll still confirm your final figures after the tax year ends, and tax will still be due by 31 January.
4. New penalty system
Late submissions and late payments will fall under a new points‑based penalty system.
Common Questions
“Will I have to pay tax every quarter?”
No. Quarterly updates are for reporting only.
“I already keep good records — do I need to change anything?”
Possibly. You may still need to switch to MTD‑compatible software.
“Is this going to make bookkeeping harder?”
Not if you keep things simple and consistent. The right software can make it easier.
What You Should Do Now
If you’re likely to be affected, getting ready early will save you stress later. Here’s a simple checklist:
- Check whether your qualifying income will exceed the threshold
- Make sure your records are tidy and up to date
- Choose MTD‑compatible software (or check your current one)
- Set up a simple routine for keeping records
- Try a “practice month” before the rules start
Need Help Getting Ready?
If you’re unsure whether MTD applies to you or you want support preparing for the changes, Lexicon Tax can guide you through the process and help you get everything in place well before April arrives.
