MTD for sole traders, explained

What “MTD for sole traders” actually means

Making Tax Digital for Income Tax (often shortened to MTD ITSA) is a change to how sole traders and landlords report income to HMRC, not a new tax. Instead of one Self Assessment return filed once a year, HMRC now wants two things through the year: digital records of your income and expenses, kept as you go, and a short update sent from that software every three months. A year-end Final Declaration then closes the tax year off, in the same way your Self Assessment return does today.

The word “sole trader” matters here because MTD for Income Tax applies to two kinds of income: self-employment income (which is what makes you a sole trader) and property income (which is what makes you a landlord). Plenty of people are both, and MTD doesn't pick one: it looks at your combined income from every source you have.

This guide focuses on the sole-trader side: who counts, when it starts, and what changes. For the specific mechanics of landlord income, HMRC's guidance uses the same rules and the same thresholds; the only difference is which income counts toward them.

Are you in scope? The three thresholds

MTD for Income Tax is being phased in by income level rather than switched on for everyone at once. HMRC's own guidance sets out three thresholds, each based on your qualifying income: your gross self-employment income plus your gross property income, added together, before you deduct any expenses:

Two details trip people up here. First, it's gross income, not profit: £35,000 of turnover with £10,000 of expenses is £35,000 of qualifying income for this test, not £25,000. Second, if you're a sole trader and a landlord, the two incomes are added together to test against the threshold, so £28,000 of self-employment income plus £25,000 of rent is £53,000 of qualifying income, over the first threshold, even though neither source alone is.

Rather than estimate, check your own position directly against HMRC's guidance: find out if and when you need to use Making Tax Digital for Income Tax and check if you're eligible for Making Tax Digital for Income Tax on GOV.UK. HMRC checks your qualifying income against the figures you actually submitted on your Self Assessment return, so that return, not a rough guess, is the number that decides it.

What changes once you're mandated

Once a threshold applies to you, three things become mandatory:

• Digital records. Your income and expenses need to be kept in MTD-compatible software as you go. A spreadsheet can still work, but only when it connects to HMRC through “bridging” software: a spreadsheet you email once a year, or a paper ledger, no longer meets the rule.
• Four quarterly updates. Every three months, your software totals your income and expenses by category for that period and sends the summary to HMRC. It is not a tax return and doesn't calculate a final tax bill; it's a running total, submitted through software, not a form you fill in on the GOV.UK website directly.
• One Final Declaration. After your fourth quarterly update, you confirm the year and finalise your tax, reporting any income the quarterly updates don't cover (employment income, savings interest, dividends, capital gains). This is what actually replaces your Self Assessment return, and it's due on the same 31 January deadline Self Assessment already uses.

If you run more than one business (say, self-employment and a rental property), each one gets its own quarterly update, so “four filings a year” becomes eight if you have two income sources, before the single Final Declaration that covers everything together.

The first deadline: 7 August 2026

For the £50,000-and-over wave, digital records started being required on 6 April 2026, and the first quarterly update (covering the period 6 April to 5 July 2026) is due 7 August 2026. HMRC's standard deadline for a quarterly update is one calendar month and two days after the period it covers ends, which is why the four deadlines in this first mandated year land on 7 August, 7 November, 7 February, and 7 May.

Sole trader, landlord, or both

The mechanics of MTD are identical either way: the same three thresholds, the same quarterly cadence, the same Final Declaration, but the practical work differs. A sole trader's quarterly update is built from invoices, receipts, and business bank transactions; a landlord's is built from rent received and allowable property expenses (repairs, letting agent fees, insurance, mortgage interest relief). If you're both, your qualifying income is the combined total for deciding when you're mandated, but you still file a separate quarterly update per business; HMRC doesn't merge the two income sources into one filing.

This is also where combining sources catches people out: a sole trader whose self-employment income alone sits comfortably under £50,000 can still be pulled into the first wave once a rental property's gross rent is added on top. If that's your situation, it's worth checking your combined figure specifically, rather than assuming each income source is judged on its own.

What to do next

1. Pull your qualifying income (gross self-employment plus gross property income) from your most recent Self Assessment return.
2. Check it against the thresholds above, or use HMRC's own eligibility guidance directly, to see which wave (if any) applies to you and from when.
3. If you're not yet mandated but expect to be soon, you can sign up for Making Tax Digital for Income Tax voluntarily ahead of your mandatory date, provided you're registered for Self Assessment and have filed a return in the last two years.
4. Either way, start moving your records digital now rather than at the deadline: see our guide to choosing MTD software for how HMRC-compatible software actually differs from what you might be using today.
5. If you're in the first wave, read our first quarterly update walkthrough before 7 August 2026 so the first filing isn't the first time you've seen the process.