The way many sole traders and landlords report their income to HMRC has changed significantly.
In April 2026, Making Tax Digital (MTD) for Income Tax became mandatory for sole traders and landlords whose gross income exceeded £50,000 in the previous tax year. While the objective is to modernise the tax system and make reporting more accurate, many business owners are still unclear about what the new rules mean in practice.
Recent research suggests that around 70% of sole traders do not fully understand their obligations under MTD, only 37% are aware of the first reporting deadline and just 8% currently use software to manage their tax records. With penalties for late submissions and non-compliance on the horizon, now is the time to get prepared.
What Has Changed?
Under the new MTD rules, eligible taxpayers must keep digital records and submit quarterly updates to HMRC using recognised software.
These updates are not full tax returns. Instead, they provide a summary of your income and expenses throughout the year, giving HMRC a more up-to-date picture of your tax position.
The first quarterly update, covering the period from April to June 2026, must be submitted by 7 August 2026.
Future submission deadlines are:
- 7 November 2026
- 7 February 2027
- 7 May 2027
Does Self-Assessment Still Apply?
Yes.
Many people assume that quarterly reporting replaces the annual Self-Assessment tax return, but this is not the case.
You will still need to complete your Self-Assessment tax return by 31 January 2027 and tax payment deadlines remain unchanged, with payments typically due on 31 January and 31 July each year.
Multiple Income Streams Mean Multiple Submissions
One important detail that is often overlooked is that separate updates must be submitted for each qualifying income source.
For example, if you are self-employed and also receive rental income from a property, you will need to submit separate quarterly updates for both income streams.
Choosing the Right Software
All MTD submissions must be made through HMRC-recognised software. There are a variety of free and paid solutions available, each offering different features and levels of support.
For some business owners, managing the process themselves may be the right option. Others may prefer to work with an accountant who can submit updates on their behalf and ensure everything remains compliant.
Don’t Leave It Until the Last Minute
Making Tax Digital represents one of the biggest changes to personal tax reporting in recent years. Although the new requirements may seem daunting at first, getting the right systems in place now can make compliance straightforward and stress-free.
If you’re unsure whether MTD applies to you, need help selecting suitable software or would like reassurance that your current setup meets HMRC requirements, we’re here to help.
At Chapmans Business Solutions, we can guide you through the process, help you stay compliant and ensure you avoid unnecessary penalties as the new regime takes effect.
Get in touch today for friendly, practical advice tailored to your business on 01775 529345 or drop us an email at office@cbsltd.org.
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