Making Tax Digital for Income Tax: What UK Sole Traders and Landlords Need From Their Software

The start date depends on your qualifying income, which HMRC measures from an earlier tax year. According to the GOV.UK page on when you need to use Making Tax Digital for Income Tax:

• Income above £50,000 in the 2024 to 2025 tax year means you should have started on 6 April 2026.
• Income above £30,000 in the 2025 to 2026 tax year means you start on 6 April 2027.
• Income above £20,000 in the 2026 to 2027 tax year means you start on 6 April 2028.

Qualifying income is your gross income from self-employment and property combined, before you deduct expenses. It does not include employment income. A sole trader with £55,000 of turnover and £15,000 of profit is therefore in the first group. The definition has its own page, work out your qualifying income, and HMRC provides a checking tool on the first page above. HMRC says it will write to people whose income is over the threshold, but if no letter arrives you are still responsible for checking.

Some people are exempt. Anyone with qualifying income of £20,000 or less is exempt automatically, and there are other exemptions, such as digital exclusion, for which you apply. The GOV.UK page on exemptions lists them. An exempt person still files a normal Self Assessment return.

These thresholds are as of October 2026. Rules for landlords with jointly owned property have their own treatment, so read the HMRC guidance for your case or ask an accountant.

HMRC sets out the service in its Making Tax Digital for Income Tax guidance collection. In summary:

• Keep digital records of income and expenses in compatible software.
• Send a quarterly update every three months. The software adds up your digital records into totals for each income and expense category and sends them to HMRC. HMRC's guidance gives the deadline as the 7th of the month after the update period ends.
• Make a final declaration at the end of the year. This replaces the old Self Assessment return for people in the service, and it is where you add other income and reliefs. The tax return and payment deadline HMRC publishes is 31 January following the tax year.

On penalties, HMRC has said that it will not apply penalty points for late quarterly updates in the first year, 2026 to 2027. Points-based penalties start from the second year. See HMRC's penalties guidance for the current position.

Whichever product you pick, check these points before paying.

• It is compatible with Making Tax Digital for Income Tax. HMRC's guidance says to confirm this with the provider. Ask for confirmation in writing, not in a marketing line.
• It records transactions digitally at source. Receipts, bank feeds and invoices go straight into the software, so you are not retyping numbers from a spreadsheet each quarter.
• It separates income types. Self-employment, UK property and, if relevant, foreign property each need their own records, because each is reported in its own section.
• It handles your accounting period. If your year does not end on 5 April, you may choose calendar update periods. The software should support that choice.
• It supports the final declaration. Some tools handle quarterly updates but send you elsewhere for the year-end step.
• It lets your accountant in. Agent access, with a clear audit trail of who changed what, saves a great deal of time when something does not reconcile.
• It keeps records safely. You must be able to export and retain your data, and personal data should be protected under UK GDPR. The ICO's security guidance is a fair benchmark when you question a vendor.

For landlords with several properties, add rent tracking per property, a way to split costs between income and capital items, and joint ownership shares. For a sole trader with many small cash sales, add mobile receipt capture and a till or payment app link.

For the great majority of sole traders and landlords, the right answer is to buy compatible software and let an accountant help set it up. The product has already been built against HMRC's interfaces and is maintained when they change. Building your own would cost far more than the subscription.

A custom build or integration starts to make sense in narrower cases:

• You run a business with its own system, for example job scheduling, a booking platform or a property-management tool, and re-keying data into accounting software every quarter is a real cost.
• You have many landlords or traders as clients and want one place to prepare their records.
• Your records come from several sources, such as a point-of-sale system, a marketplace and a bank, and no off-the-shelf product combines them the way you need.

In these cases the work is usually an integration: your system keeps the digital records, then passes them to compatible software, or sends them directly through HMRC's published interfaces. HMRC documents the Making Tax Digital for Income Tax end-to-end service for developers. A software product that sends data directly must be built and tested against those interfaces, which is a larger project than most small businesses expect. Often the cheaper route is connecting your system to an existing compatible product.

If you run a business that has outgrown separate tools, an ERP that carries sales, purchases and stock can feed a single clean set of records. We cover how we approach that on our ERP development page for the UK, and our ERPSetu case study shows a multi-industry system we built for Indian businesses.

Do these things in the order shown, whatever software you choose.

• Find out your start date using HMRC's checker, and note whether an exemption applies.
• Gather last year's turnover by income source so you can check thresholds and set up the categories.
• Move to digital records now. Starting a few months before your required date removes the risk of a rushed first quarter.
• Agree with your accountant who sends the quarterly updates and who submits the final declaration.
• Test one quarter early where you can. HMRC allows volunteers to join before their mandatory date, as the first GOV.UK page above notes.

Does Making Tax Digital for Income Tax apply to me if I earn £40,000?

Not from April 2026. If your qualifying income for the 2025 to 2026 tax year is over £30,000 you will need to start on 6 April 2027. Check HMRC's tool, because qualifying income uses gross income, not profit.

Can I use a spreadsheet?

Digital records must be kept in software that is compatible with the service. A spreadsheet can sometimes be part of a compatible setup when linked with bridging software, but check the product's compatibility with HMRC before relying on it.

Is quarterly reporting the same as paying tax every quarter?

No. A quarterly update reports your totals. It does not change when you pay tax, which is set by Self Assessment payment dates.

Do I still file a Self Assessment return?

Those in the service make a final declaration for the year instead. People who are exempt continue to file a Self Assessment return in the usual way.

Can DipanshuTech build Making Tax Digital software?

We can build integrations and business systems that keep clean digital records. We do not claim a ready-made product for this. We would start with a discovery call to see whether buying, connecting or building suits you.

If your records live in a booking system, ERP or spreadsheet and you want them to feed compatible tax software without retyping, contact us. We will tell you plainly whether a small integration, a larger build, or simply an off-the-shelf product is the sensible answer. Our wider UK offering is on the UK page.