Making Tax Digital for Income Tax - Sole Traders & Landlords
The UK tax system is going digital, with plans in place from April 2026 to include some sole traders and landlords. 2025 is the year to get you and your business ready and embrace digital record-keeping.
What is Making Tax Digital for Income Tax?
People have used the term Making Tax Digital for several years. Until now, it has mainly related to paying Value Added Tax (VAT). Sole traders and landlords have traditionally filed their online annual Self-Assessment Tax return by the end of January.
This is about to change:
From April 2026, MTD for IT will apply to sole traders and landlords whose total business or property income exceeds £50,000 per annum.
Starting from April 2027, the government will include sole traders and landlords who earn more than £30,000 per annum.
In practice, this means that the way you manage your tax obligation to HMRC will change. For some sole traders and landlords, these changes are just over a year away. For others, it will be abother two years before you see any changes.You may feel this isn't something to worry about right now.
Running a business takes time and energy. For some, introducing digital record keeping won't be an issue but for others, it will be a significant transformation.
Many different options exist for accounting software. They all do the same thing, but in different ways. When you are unfamiliar with a new progam, it takes time to get to grips with it!
And this is your money we are talking about! You want to be confident that the numbers you submit to HMRC are correct and that all your records are accurate. You also want to trust that your data is secure and you can access it easily.
MTD for Income Tax Requirements
Before you start, you need to understand what HMRC currently has planned. Under MTD for IT, sole traders and landlords will need to:
Maintain digital records
Use HMRC-recognised software to manage, track, and submit updates to HMRC such as Xero, QuickBooks or Sage
HMRC are rolling out the programme and at the time of writing, key dates are:
April 2026: MTD for IT will apply to businesses and landlords with income over £50,000
April 2027: The threshold will lower to £30,000
Future plans include extending MTD to those earning above £20,000
Businesses will need to submit quarterly updates of their income and expenditure to HMRC, and a Final Declaration at the end of the year for other taxable income such as savings and investments.
When and how sole traders and landlord file tax returns will change under the Making Tax Digital for Income Tax.
Preparing for MTD for IT
We understand that MTD for IT represents a significant change for some clients. Many of the affected businesses may not keep formal records. If they do, it is usually just for Self Assessment.
Some sole traders and landlords may not use accounting software that works with MTD. Examples include Xero and QuickBooks. This may be because their current record-keeping is fine but they might also not have found a solution that works for them.
By moving from paper or spreadsheets to bookkeeping software, you will make quarterly reporting easier. This will help you follow digital record-keeping rules.
Exemptions from MTD for IT
Some businesses are exempt from MTD for IT requirements:
General Partnerships: These are not yet included in the MTD roll-out
Sole Traders and Landlords: Clients who are digitally excluded can apply for an exemption if:
It is not practical for them to use software for keeping records or sending updates to HMRC. This could be because of age, disability, location, or other reasons.
They belong to a religion that prohibits the use of electronic communications or record-keeping
They cannot obtain a National Insurance number, thus unable to access HMRC’s online services
They are foster carers receiving qualifying care income
HMRC will assess and confirm the exemption request. If denied, clients can appeal the decision.
Note: The process for requesting a digital exemption from MTD for IT is still under development. We’ll update you as soon as HMRC shares new guidance.
How Prontus can help with MTD requirements
Don’t leave it until the last minute! We strongly suggest that in 2025, if you do not use accounting software like Xero or QuickBooks, you should explore your options. Other choices include Sage.
We can look at the options with you. Since we use different software with various clients, we can help you find the best option at the right price.
We can provide you with a better and more efficient service. Bookkeeping means keeping your business financial records organized. This helps your accountant see everything clearly. With Xero or QuickBooks, you and your accountant can access your accounts at the same time.
We are up to date with the proposed change. There will be more information on Making Tax Digital for landlords and sole traders next year. As IAB members, we stay updated by our supervisory authority. Key people from this association join working and testing groups with HMRC feeding back to its members, including us.
For more information on how we can help you with Making Tax Digital, email us on hello@prontus.co.uk
Disclaimer - like all our content and posts, we share this information in good faith. The facts and figures mentioned are correct as of the publication date. For more information on Making Tax Digital for landlords and sole traders, visit the HMRC website. You can also sign up for their newsletter to receive the latest updates. For MTD and tax advice, please consult your accountant.
