Quick answer: Making Tax Digital for Income Tax applies from April 2026 to sole traders and landlords with combined gross income over £50,000. It replaces the single annual tax return with digital record keeping and quarterly updates filed through HMRC-recognised software. Bayar Hughes & Co is MTD-ready — we run TaxCalc in practice and file every update for our clients.
Who is caught, and when
April 2026 — sole traders and landlords whose combined gross self-employment and property income was over £50,000 on their last filed return. April 2027 — the threshold drops to £30,000. VAT-registered businesses have already been filing under MTD for VAT since 2022. The test is gross income before expenses, and it adds your business turnover and rent together — a part-time landlord with a growing side business can cross the line without noticing.
What changes in practice
- Records must be kept digitally in HMRC-recognised software — a shoebox of receipts or a simple spreadsheet alone no longer satisfies the rules.
- Quarterly updates go to HMRC within a month of each quarter end — at least four submissions a year per income source.
- A final declaration after the year end replaces the current self assessment, confirming the full-year figures.
- Late submissions accrue penalty points; enough points convert into fines.
How we make it invisible
As a Bayar Hughes client you do not need to buy software, learn a new system or remember four extra deadlines. We set up your digital records in TaxCalc, connect your bookkeeping, prepare and file each quarterly update, and complete the final declaration — with a fixed fee agreed up front. You carry on running your business; we keep HMRC satisfied.
MTD Questions, Answered
When does Making Tax Digital for Income Tax start?
From April 2026 for sole traders and landlords with combined gross income over £50,000, and from April 2027 for those over £30,000. VAT-registered businesses have been under MTD for VAT since 2022.
Does the £50,000 threshold include rental income?
Yes. The test is your combined gross self-employment turnover plus gross rental income before expenses, based on your most recent filed tax return. Many landlords with a side business are caught without realising.
What actually changes under MTD for Income Tax?
Instead of one annual self assessment, you keep digital records and send HMRC a quarterly update through compatible software, then a final declaration after the year end — at least five submissions a year.
What software do I need for MTD?
HMRC-recognised software such as TaxCalc, which we use in practice. As our client you do not need to buy or learn anything — we maintain the digital records and file every quarterly update for you.
What happens if I ignore MTD?
HMRC applies a points-based penalty system for late quarterly submissions, and the final declaration deadlines carry the existing late-filing and late-payment penalties. Getting set up before April is far cheaper than catching up after.