Making Tax Digital for Income Tax is HMRC’s new system for reporting income from self-employment and property using approved software, rather than relying solely on one tax return at the end of the year. It is being introduced in stages, so not everyone will be affected straight away.

The new rules begin on 6 April 2026 for sole traders and landlords with qualifying income over £50,000. From 6 April 2027, the threshold reduces to over £30,000, and from 6 April 2028 it will reduce again to over £20,000. HMRC will look at your gross income from self-employment and property before expenses are deducted, based on the figures shown on your latest tax return.

For sole traders, this will mean a change in the way records are kept and information is submitted to HMRC. Instead of relying on paper records or standalone spreadsheets, you will need to keep digital records using compatible software. You will also need to send quarterly updates to HMRC during the year, followed by a final end-of-year submission.

It is important to note that quarterly updates do not mean paying tax every three months. They are simply a more regular way of reporting information to HMRC.