Making Tax Digital has arrived for landlords and sole traders over £50,000

For twenty years the routine barely changed. A shoebox of receipts from two rented flats, an evening in January with a spreadsheet, and a Self Assessment return filed just before the deadline. This spring the letter from HMRC said something different: from 6 April 2026, the records had to be digital and HMRC wanted a summary every three months.

Making Tax Digital for Income Tax is now in force for the first group of sole traders and landlords, with two more groups due to follow.

What Making Tax Digital actually changes

Making Tax Digital for Income Tax does not create a new tax and does not change how much Income Tax is due. It changes how records are kept and how often information reaches HMRC.

Anyone in scope must keep digital records of self-employment and property income and expenses, using software that works with the service. From those records the software sends HMRC a quarterly update, and after the tax year ends the same software is used to submit the tax return. HMRC does not make the software itself, but its software finder on GOV.UK lists recognised products, both free and paid. Spreadsheets can still be used if they are linked to compatible bridging software.

Who has to join, and when

The service applies to individuals registered for Self Assessment who have self-employment or property income, once their qualifying income is above a threshold. HMRC looks at a past tax return to decide.

Partnerships do not currently need to use the service; HMRC says their timetable will be set later.

HMRC writes to people it identifies as being over a threshold. Its guidance is clear, though, that anyone who receives no letter is still responsible for checking whether and when they need to join.

How qualifying income is worked out

The figure that matters is not profit. Qualifying income is the total of self-employment and property income before expenses, which HMRC also calls turnover. It includes UK property income, foreign property income for UK residents and your share of income from a jointly owned property.

Several common sources are left out: wages taxed through PAYE, the State Pension and private pensions, dividends, and your share of profit from a partnership. A retired landlord with a good pension can sit well below the threshold.

Assumes each person’s income stays at the same level in the tax year HMRC uses for their stage. David’s pensions do not count, and only his half share of the rent does.

The quarterly updates and their deadlines

A quarterly update is a summary, not a tax return. The software sends totals for each income and expense category for each business, covering the tax year so far. No receipts or invoices go to HMRC, and no accounting adjustments are needed at this stage. An update is still required for a quarter with nothing in it.

People whose accounting period runs from 1 April to 31 March can use calendar quarters ending 30 June, 30 September, 31 December and 31 March, with the same deadlines.

The tax return at the end of the year

After the fourth update, the tax return is still the moment the year’s tax bill is settled. Under the service it is submitted through the same software, by 31 January after the end of the tax year, so the first one for 2026 to 2027 is due by 31 January 2028. HMRC adds information it already holds, such as PAYE wages and pension income. You add what it does not have, such as savings interest and dividends, and declare that the return is correct and complete.

Worth knowing

Landlords face a separate change from 6 April 2027. Budget 2025 announced separate property rates of Income Tax, and the Budget published on 28 October 2026 set them at 24% (basic), 44% (higher) and 49% (additional) for England, Wales and Northern Ireland, four points above the main rates.

Exemptions, including for the digitally excluded

Some people are exempt automatically, with no need to contact HMRC. They include people without a National Insurance number before the start of the tax year, personal representatives of someone who has died, and people who declared on their 2024 to 2025 return that they cannot manage their affairs and have a power of attorney or a legally appointed deputy.

Others must apply. The main route is for people who are digitally excluded: those who cannot reasonably use software because of age, health or disability, because of religious beliefs, or because there is no internet access where they live. HMRC says that having always filed on paper, or being unfamiliar with software, is not enough on its own. Applications go by phone or letter to Self Assessment general enquiries, and applying directly with HMRC is free.

The Budget published on 28 October 2026 added further groups to be exempt until further notice, including people eligible for qualifying care relief, with the legislation due before April 2027.

Penalty points and the first-year easing

The service uses a points system for late submissions. HMRC has said no penalty points will be issued for late quarterly updates during 2026 to 2027, the first year. The updates still have to be sent before the tax return can be filed, and a late tax return can still attract a point.

From 2027 to 2028, each missed quarterly deadline earns one point, and reaching four points brings a £200 penalty. The 28 October 2026 Budget extended the same first-year easing to the group joining in April 2027, so their late quarterly updates will not attract points in 2027 to 2028.

Who should look at this, and what to check

Long-standing landlords and sole traders who are not used to software are the most affected. A few checks help:

1. Add up turnover from self-employment and gross rent for the relevant year, leaving out pensions, wages and dividends.
2. Compare it with the £50,000, £30,000 and £20,000 thresholds and the tax year each one uses.
3. If you think an exemption applies, read HMRC’s exemption guidance and contact HMRC directly.
4. If you are in scope, choose compatible software and note the four update deadlines.

Income that sits outside the service still needs care. Our guide to the £5,000 starting rate for savings explains how interest is taxed alongside other income, and anyone selling a rental flat to buy a smaller home may find the current Stamp Duty bands useful.

Where this leaves you

Making Tax Digital changes the rhythm of Self Assessment, not the tax itself. Qualifying income over £50,000 brought people in from 6 April 2026, with £30,000 following in April 2027 and £20,000 in April 2028. Four quarterly summaries now sit alongside the 31 January return, the first year carries no points for late updates, and genuine exemptions exist for those who cannot go digital.