Making Tax Digital for sole traders and landlords: the quarterly checklist (2026–2028)

Last updated 11 Oct 2026 · United Kingdom

Who is in, and when

HMRC looks at the Self Assessment return you sent for the tax year two years before the start date. If your qualifying income on that return is over the threshold, you start on the next 6 April.

Qualifying income is turnover, not profit. It is your total income from self-employment and property, before expenses. GOV.UK's own example: £25,000 rent plus £27,000 self-employment income is £52,000 of qualifying income, so that person is in from April 2026, even if their profit is far lower. If you jointly own a let property, only your share counts.

What does not count: employment (PAYE) wages, your share of profit from a partnership as an individual partner, dividends (including from your own company), the State Pension and private pensions.

Who is outside it, for now: if your qualifying income is £20,000 or less you are automatically exempt. Partnerships do not need to use it yet; HMRC will set a timeline later. Some people can apply for an exemption, for example if they are digitally excluded. If you are exempt you still file a normal Self Assessment return.

HMRC writes to people it thinks must join, but if no letter arrives it is still your responsibility to check and sign up. HMRC's online checker asks about your 2024 to 2025, 2025 to 2026 and 2026 to 2027 income. Once you are in, you can choose to opt out only if your qualifying income drops below the threshold for 3 tax years in a row.

What a quarterly update is

A quarterly update is a summary, not a tax return. Your software adds up your digital records into totals for each income and expense category, and sends those totals to HMRC. HMRC does not see individual receipts or invoices. You do not make accounting or tax adjustments at this stage.

• Each update is cumulative. It covers from the start of the tax year to the end of the period, so a mistake found in quarter 3 is simply corrected in your records and flows into the next update.
• Send one even if nothing happened. A nil quarter still needs an update.
• One per business. Each sole-trader business sends its own update. All your UK let properties count as one UK property business (foreign property is a separate business).
• You can send early: any time after the period ends, or up to 10 days before it ends if you expect no more transactions.

Calendar periods suit businesses whose accounting year runs 1 April to 31 March. You must pick them in your software before the first update of the year; you cannot switch mid-year after sending one.

Your first year if you started in April 2026

Your 2025 to 2026 return is still filed the usual way, by 31 January 2027. If you signed up late, you catch up by entering records from the start of the tax year; they go into your first update.

The year-end tax return (the "final declaration")

Older material calls it the final declaration; HMRC's current guidance simply calls it your tax return. After the fourth update you:

1. Make any adjustments (for example capital allowances, simplified expenses, disallowable or private-use parts of costs). If you need to correct records, fix them and resend the fourth update first.
2. Check the other income HMRC adds (PAYE wages, pensions, student loan plan, CIS deductions and more) and add what it doesn't have, such as savings interest, dividends and partnership profit share.
3. Claim reliefs and allowances, check the calculation, and declare it correct and complete in your software by 31 January after the tax year.

MTD does not change how or when you pay Income Tax. You can amend a return within 12 months of the submission deadline, through your software.

Software: what you need

• HMRC does not provide software. You need commercial software that works with MTD for Income Tax. HMRC's software finder lists products that passed its recognition process; HMRC does not recommend any product. Free products exist for simple affairs, often with limits.
• Two routes. All-in-one software that creates records, sends updates and files the return; or bridging software that connects to records you keep in a spreadsheet. A spreadsheet on its own cannot send anything to HMRC.
• Digital links. If you use more than one product, data must flow digitally (linked cells, CSV import, API), not by retyping or copy-paste, once records are part of an update.
• One product per submission. For example, a landlord cannot split property updates across two products.
• Check fit: all your income sources, your update period type, other income on the return, and, if VAT-registered, whether the same software covers VAT.

What each digital record needs

Every record needs the amount, the date, and the category. MTD uses the same categories as Self Assessment. For self-employment they are: turnover; other business income; cost of goods; payments to construction subcontractors; wages and staff costs; car, van and travel; rent, rates, power and insurance; repairs and maintenance; phone, stationery and office costs; advertising; business entertainment; interest on loans; bank and card charges; accountancy, legal and professional fees; other business expenses.

If a business's turnover is under £90,000 (the VAT threshold), you may use simpler categorisation: a sole trader only marks each record as income or expense. Residential landlords must still record finance costs such as mortgage interest separately. Keep digital records and original documents for at least 5 years after the 31 January deadline.

Penalties, briefly

For the 2026 to 2027 tax year HMRC will not give penalty points for late quarterly updates, but you must send all four before you can submit the return. From 2027 to 2028, each missed deadline earns a point; at 4 points you get a £200 penalty, and £200 for each further miss. A late tax return earns a point in every year. Late payment penalties are separate and grow the longer tax stays unpaid.

Common mistakes

• Measuring profit instead of turnover. The threshold is on income before expenses, combined across trades and lettings.
• Waiting for HMRC's letter. No letter does not mean you are out.
• Thinking "quarterly tax". Updates are summaries; payment dates don't change.
• Skipping nil quarters, or a quiet second business or let property.
• Retyping spreadsheet totals into another tool. Use bridging software and digital links.
• Getting categories wrong (personal costs as business, capital purchases as expenses). Adjust before the return.
• Treating 2026 to 2027 as optional because there are no update penalty points. The updates are still required before the return.

The quarterly checklist

• Checked qualifying income (turnover, self-employment plus property) on the right year's return
• Checked exemptions; applied if digitally excluded
• Chosen compatible software (or bridging software for a spreadsheet)
• Signed up and authorised the software
• Chosen standard or calendar update periods before update 1
• Every income and expense recorded with date, amount and category, as close to the day as possible
• Business and private bank use kept apart where you can
• Receipts and invoices kept for 5+ years
• Update sent by 7 Aug / 7 Nov / 7 Feb / 7 May (including nil quarters)
• Estimate checked after each update and money set aside
• After update 4: adjustments, other income, reliefs, then tax return by 31 January

Would a limited company make more sense?

Sometimes people ask whether trading through a limited company avoids MTD for Income Tax. The honest answer is that it changes your whole setup, not just your paperwork, so it is not a decision to make for MTD alone. Facts from GOV.UK to weigh:

• MTD for Income Tax covers individuals' self-employment and property income. A limited company is legally separate from its owners and pays Corporation Tax on its profits; dividends you receive from your own company do not count toward MTD qualifying income.
• A company brings its own duties: registering before trading, directors' rules on taking money out (salary, dividends, director's loans), and filing company accounts and company tax returns.
• Directors may still need a personal Self Assessment return, and any personal self-employment or property income still counts toward MTD.
• Moving an existing business, and especially let property, into a company can have other tax and legal consequences.

Whether it suits you depends on your profits, plans and circumstances. Get advice from a qualified accountant or tax adviser before changing structure; this page does not recommend either option.

Frequently asked questions

Official sources

• GOV.UK: Find out if and when you need to use Making Tax Digital for Income Tax
• GOV.UK: Work out your qualifying income
• GOV.UK: Use MTD for Income Tax: before you use this guide (first-year timeline)
• GOV.UK: Use MTD for Income Tax: send quarterly updates
• GOV.UK: Use MTD for Income Tax: create digital records
• GOV.UK: Use MTD for Income Tax: submit your tax return
• GOV.UK: Choose the right software for MTD for Income Tax
• GOV.UK: MTD for Income Tax quarterly update direction (categories)
• GOV.UK: Penalties for MTD for Income Tax
• GOV.UK: Find out if you can get an exemption
• GOV.UK: Choose a legal structure for your business (sole trader vs limited company)

Not tax, legal or financial advice. This is a free, independent explainer of HMRC's published guidance; it is not from HMRC. Rules can change, so check GOV.UK or a qualified adviser before you act. Last checked 11 Oct 2026.

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