SPECIAL REPORT
Making Tax Digital (MTD) for Income Tax becomes mandatory on 6 April 2026 for anyone with a qualifying income over £50,000. This threshold is based on your gross turnover from 2024/25, not your profit. This report covers the latest on MTD rules and those who will be caught up in the first wave (and may not even know it).
Key impacts:
- Filings: Move from 1 annual return to 4 quarterly updates + 1 final declaration
- Software: Spreadsheets must be replaced by HMRC-compatible software
- The gotchas: Rental income and side-hustle turnover are combined to reach the threshold. Businesses set up in 2024/25 that earned less than £50,000 could still have to file for MTD under the HMRC annualisation calculation
Experts are warning that millions of taxpayers remain blissfully—or dangerously—unaware of the looming April 2026 deadline for Making Tax Digital (MTD). In this special report, we cover anyone who might fall into the first wave of MTD, the relevant forms, rules most people aren’t aware of, and expected costs.
The new reality for landlords and sole traders
For many, the new filing requirements are a jarring departure from traditional accounting. Kundan Bhaduri, landlord at London-based The Kushman Group, described in a Newspage agency report, the new requirements as a “pointless exercise in data harvesting.”
As we stare down the barrel of the April 2026 implementation date for those earning over £50,000, the reality of what is being asked of us is staggering. Landlords like us are moving from a system of one annual tax return… to a regime of four quarterly updates plus a final declaration.
Matthew Knight, Chief Freelance Officer at The Independency Co., noted that awareness in the freelancing community is “incredibly low,” warning of “frustrating additional burdens… and potentially additional costs in terms of software and time.”
However, some see a silver lining. Colette Mason, Author & AI Consultant at London-based Clever Clogs AI, argued that the “annual shoebox-of-receipts panic” needs to end.
The surprise isn’t about Making Tax Digital, it’s that anyone’s still filing on paper in 2026.
–Colette Mason, Author & AI Consultant
Limited company directors: A brief reprieve, but only for some
While sole traders and landlords are in the spotlight, limited company directors find themselves in a unique position.
Currently, the government has paused plans for MTD for Corporation Tax, meaning the company’s main tax return remains annual.
However, directors aren’t entirely off the hook. If a director also earns personal “qualifying income” over the threshold—such as from a rental property or a side hustle—they will be pulled into the MTD system for those specific income streams.
How to check if you are in the first MTD wave
The criteria for joining MTD aren’t based on your current feelings about technology, but on specific numbers from your most recent tax filing. To see if you are required to join in April 2026, you must check your 2024/25 tax return.
HMRC calculates your qualifying income by totalling specific boxes on your supplementary pages. If the combined total across these boxes exceeds £50,000, you are mandated to start quarterly filings.
The MTD Checklist (Form SA100):
Use these specific boxes from your most recent tax return to calculate your “Qualifying Income”:
Self-Employment
Short Form (SA103S): Check Box 9 (Turnover) and Box 10 (Other income).
Full Form (SA103F): Check Box 15 (Turnover) and Box 16 (Other business income).
More info: HMRC Guidance: Work out your qualifying income for MTD
UK Property: Check SA105 for the following:
Box 5: Furnished Holiday Lettings (FHL) income.
Box 20: Total rents and other income from property.
Boxes 22 & 23: Premiums for the grant of a lease and reverse premiums.
More info: HMRC Agent Toolkit: MTD Planning Guide
Foreign Property: Check SA106:
Box 14: Total gross income from all foreign properties.
Box 16: Total premiums from all foreign properties.
More info: ICAEW Technical Guide: MTD Income Tax (01/25)
MTD’s financial and admin burden
One of the most contentious points remains the cost. Stephen Perkins, Managing Director at Norwich-based Yellow Brick Mortgages, warned that micro-businesses and community groups will struggle with an “expensive transition.”
“The cost of the software needed to make the returns compliant is higher than the government advises and is an extra cost to bear,” Perkins told Newspage. “Switching from an Excel spreadsheet or cash book to this software could be the last straw on the camel’s back for many micro-businesses.”
Are accountants charging more for MTD?
Yes, you should expect accountants to charge more. The reason is that MTD moves the workload from a once-a-year event to a five-times-a-year event (four quarterly updates plus one final declaration).
How much will MTD accountancy fees be?
You will probably see more accountants introduce an MTD service fee or a per-submission charge. You might see a charge of £100 to £150 per quarter specifically for the filing and review process.
Some might shift to subscriptions. That’s because the January surprise bill is disappearing. Most firms are moving to monthly retainers (e.g., £50–£150/month) that cover your software subscription, quarterly filings, and year-end work all in one.
They may also add software costs. Under MTD, you must use compatible software. If your accountant provides this for you (like Xero or QuickBooks), they will likely pass that cost (approx. £15–£35/month) on to you.
Then there could be the manual records “penalty”. If you still give your accountant a bag of receipts or a non-compliant spreadsheet, they will likely charge significantly more for the digital conversion time required to make that data MTD-ready.
Tip:
Ask your accountant if they offer a “review only” service. If you do the bookkeeping perfectly in the software yourself, some accountants will charge a lower fee just to perform a quick look over your accounts before filing the quarterly update.
Don’t wait for HMRC’s MTD letter
While HMRC expects to send out letters by March 2026, experts urge taxpayers not to wait. Colette Mason, Author & AI Consultant at Clever Clogs AI, argued:
Not everyone’s digitally confident, not everyone can afford subscriptions, data centralisation fears, and HMRC’s own system failings. This has been signalled for years informally and now formally. If you’re caught off guard, the problem probably isn’t the deadline, it’s that bookkeeping was already being neglected and MTD forces the issue.
She continued, “It’s uncomfortable, but ultimately better for sole traders who’ll finally see their numbers timely and clearly enough to make proper decisions.”
As Kate Allen, Owner at Kingsbridge-based Finest Stays, said in the Newspage report:
Digital, real-time reporting is coming whether businesses like it or not, so adapting early is key.
MTD qualifying income calculator
To help you visualise your standing, here is a simplified calculator table and a decision process. This should help you determine if and when you enter the MTD system. To use this, look at the figures on your 2024/25 tax return (due Jan 31, 2026). Add only the figures from the “Include” column.
| Income type | Source | Include? | Example |
| Self-Employment | Turnover (before expenses) | YES | £35,000 |
| Rental Income | Total Rent (before expenses) | YES | £18,000 |
| Director Salary | PAYE Earnings | NO | £0 |
| Dividends | Company Distributions | NO | £0 |
| Savings/Pension | Interest or State/Private Pension | NO | £0 |
| Total Qualifying Income | = | £53,000 |
MTD start dates
Based on your total from the calculator above, here is your start date for quarterly digital reporting:
| Total Qualifying Income | MTD Start Date | First Quarterly Deadline |
| Over £50,000 | 6 April 2026 | 7 August 2026 |
| £30,001 – £50,000 | 6 April 2027 | 7 August 2027 |
| £20,001 – £30,000 | 6 April 2028 | 7 August 2028 |
| Under £20,000 | Exempt (for now) | N/A |
Important rules many people aren’t aware of:
- Joint property: If you own a rental property with a spouse, you only count your share of the gross rent (e.g., if the total rent is £60k and you own 50%, you count £30k).
- The three-year trap: Once you are mandated into MTD, you must usually stay in the system for three consecutive years, even if your income drops below the threshold in the second or third year.
- Annualisation: If you started a new business or property let halfway through the 2024/25 tax year, HMRC may “annualise” that income. For example, if you earned £20k in 6 months, they treat it as £40k for the purposes of the threshold.
Ceased income sources and Making Tax Digital (MTD)
Self-employment or property income that has ceased since you submitted your last tax return will be included in your qualifying income if you have another continuing source of self-employment or property income.
For example, you may have had three different sources of self-employment income on your tax return for the 2024 to 2025 tax year. If one of these sources ceased during that tax year but you continue to receive income from the other two sources, the income received from the ceased source will still count towards your qualifying income.
If your income from self-employment or property (including income from ceased sources) is more than the relevant threshold, you’ll need to use Making Tax Digital for Income Tax.
Once you start using the service and your qualifying income drops below the relevant threshold for 3 tax years in a row, you can choose to opt out.
If all your self-employment or property income sources have stopped since you submitted your last Self-Assessment tax return, you:
- Will not need to use Making Tax Digital for Income Tax
- Should tell HMRC
While HMRC does not provide its own free software for MTD, several commercial providers have launched “free-for-life” or “bank-linked” versions to help small landlords and sole traders avoid high monthly fees.
The best choice depends on whether you value a specialist property tool or a general accounting app.
1. The bank-linked free options
These are full-feature premium apps that become 100% free if you hold a specific business bank account.
FreeAgent: Free if you have a business current account with, for example, NatWest, Royal Bank of Scotland, Ulster Bank, for as long as you retain the account, or have a Mettle bank account and make at least one transaction a month. Optional add-ons may be chargeable. It handles both property and sole trader income in one dashboard and also has a service for limited company directors.
Starling has built its own “MTD Tool” directly into its Sole Trader bank account. It allows you to record receipts and file quarterly updates directly from your banking app at no extra cost.
2. Free software (no banking requirements)
These platforms offer a free tier regardless of who you bank with, though some have transaction or revenue limits.
- Clear Books (Free Version): A UK-built free plan for sole traders and landlords. Unlike others, it has no revenue cap, making it ideal for those just over the £50,000 threshold who want to keep costs at zero
- Sage Individual (Free): A simplified, web-based version of Sage designed specifically for non-VAT registered sole traders. It covers the basics: digital records and quarterly MTD submissions
- QuickFile: Offers a free tier for businesses with fewer than 1,000 transactions per year. It’s a bit more technical but useful for DIY bookkeepers
- Zoho Books: Free for businesses with a turnover under £35,000. (Note: This won’t help those in the first wave of MTD, but it’s a great option for those entering in 2027/28)
3. Specialist landlord tools (with free tiers)
If you have a complex portfolio (joint owners, HMOs, or multiple properties), general accounting software can feel clunky. These tools are built specifically for property:
- RentalBux: Offers a free plan for single-property landlords until March 2028. It is specifically designed to handle complex profit-sharing (e.g., a 60/40 split between spouses)
- Landlord Studio: Their “GO” plan is free for your first 3 units. It includes a receipt scanner and bank feeds, making it a great mobile-first option
Comparison: Which MTD software should you consider?
“Free” software often excludes bank feeds (the feature that automatically pulls in your bank transactions). For example, QuickFile is free but charges £15/year for the bank feed. Always check if the automation part is included.
| If you… | Software to consider |
| Bank with NatWest/Mettle | FreeAgent (Professional & Comprehensive) |
| Want zero cost, no catch | Clear Books (No revenue limits) |
| Have a side hustle + property | FreeAgent or Starling (Consolidates both) |
| Own property with a partner | RentalBux (Handles split ownership best) |
| Use a spreadsheet currently | TaxCalc (Bridging software) |
As MTD for Income Tax (ITSA) regulations evolve, make sure you check the HMRC–recognised software list to confirm your chosen software version is officially approved for the specific tax year.
DISCLAIMER/ Note to readers
This article is for informational purposes only and does not constitute formal tax, legal, or financial advice.
Tax rules can be tricky, and HMRC can move the goalposts. While we’ve provided information in this guide to be as accurate as possible for the 2026 MTD rollout, it should not be treated as a substitute for professional advice. Every business and property portfolio is unique. For example, what applies to one Director, sole trader, or landlord might not apply to another. Please double-check your specific figures with a certified accountant to ensure you stay on the right side of the “gotchas.”