Sole Traders and Landlords Urged to Prepare for New Tax Rules

Sole traders and landlords earning over £50,000 from self-employment and property must prepare for significant changes to tax reporting. With just two months remaining, they are urged to familiarize themselves with the new Making Tax Digital (MTD) for Income Tax regulations, which will take effect on 6 April 2026.

Under the new rules, eligible individuals will be required to maintain digital records and submit quarterly updates of their income and expenses to HM Revenue and Customs (HMRC). It is important to note that these updates are not additional tax returns; instead, they simplify the process of tax reporting.

Transitioning to Digital Tax Reporting

Free software options will be available to assist users in managing their financial records. Once income and expenses are entered, the software will generate a concise summary for submission to HMRC. At the end of each tax year, individuals will still need to file a tax return by the following 31 January. However, the software will have already compiled the necessary data from the quarterly updates, minimizing the need for last-minute searches for records or receipts.

Craig Ogilvie, HMRC’s Director of Making Tax Digital, emphasized the importance of acting promptly. “With two months to go until MTD for Income Tax launches, now is the time to act,” he stated. “A range of software is available, and the system is straightforward and helps reduce errors. Thousands of volunteers have already used it successfully.”

Ogilvie highlighted that the new system will facilitate better tax management for sole traders and landlords, ensuring compliance and accuracy in tax payments. By spreading tax administration throughout the year, individuals can avoid the annual rush to complete tax returns each January.

Support and Penalty Exemptions

Many sole traders and landlords have already begun the transition to MTD, with over 12,000 quarterly updates successfully submitted during a voluntary testing program. Those who first join MTD in April 2026 will still file their tax return for the 2025 to 2026 tax year using traditional methods by 31 January 2027. The first MTD tax return, covering the 2026 to 2027 tax year, will be due by 31 January 2028.

To ease the adjustment, the government announced that customers who enroll in MTD for Income Tax in April 2026 will not incur penalty points for late quarterly updates during the first year. Under the new system, penalty points will be assigned for each late submission, with a £200 penalty applied only after four points are accumulated. This provision allows for occasional delays without immediate financial repercussions.

HMRC is also offering comprehensive support to assist individuals in their preparations, including online guidance, webinars, and instructional videos. Those who genuinely cannot adapt to digital tools may apply for an exemption. Additional information and resources can be found on GOV.UK.

The upcoming changes represent a significant shift in how self-employed individuals and landlords manage their tax obligations. Proactive preparation and understanding of the digital requirements will be essential for compliance and successful navigation of the new system.