Making Tax Digital for landlords and sole traders: Managing the new 2026 quarterly rules

Making Tax Digital for Income Tax now affects sole traders and landlords with qualifying income over £50,000 from 6 April 2026, so you need digital records, compatible software and a clear quarterly routine before your first HMRC update is due. The first standard quarterly update for the 2026 to 2027 tax year covers 6 April to 5 July 2026 and must be submitted by 7 August 2026.

This is not just a software change. It changes how you manage your records during the year. If you usually sort your rental income, invoices, receipts and expenses close to the Self Assessment deadline, that approach is now too risky.

The good news is that you can make the system manageable. With the right setup, MTD can give you a clearer view of tax, cash flow and profit throughout the year rather than leaving everything until January.

If you need support from accountants Nottingham, FHP Accounting can help you check whether MTD applies to you, choose suitable software and build a realistic reporting routine.

What is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax is HMRC’s digital reporting system for individuals with qualifying self-employment and property income.

Instead of relying on annual records prepared after the tax year has ended, you need to keep digital records during the year and send quarterly updates to HMRC using compatible software.

FHP’s guide to Making Tax Digital for Income Tax explains the wider rules for sole traders and landlords, while the guide to MTD quarterly reporting covers the first submission timetable in more detail.

Under MTD, you will usually need to:

1. Keep digital records of income and expenses
2. Use compatible software
3. Send quarterly updates to HMRC
4. Review and correct your figures before the final return
5. Submit your tax return through software
6. Pay any tax due by the normal 31 January deadline

MTD does not mean HMRC receives every individual receipt or invoice in each quarterly update. The update sends totals for income and expense categories. However, your underlying records still need to be accurate, complete and digitally stored.

Who needs to follow the 2026 MTD rules?

From 6 April 2026, MTD for Income Tax applies if you are an individual registered for Self Assessment and your qualifying income from self-employment, property, or both, is over £50,000.

The key word is qualifying income. This is based on gross income before expenses, not profit.

For example, if you earn £38,000 from self-employment and receive £15,000 in gross rental income, your qualifying income is £53,000. That could bring you into MTD from April 2026, even if your taxable profit is much lower after costs.

The phased thresholds are:

This is why sole traders should not wait until they are near the threshold. If you are growing quickly, working with an accountant for startup business can help you set up records properly from day 1.

What counts towards qualifying income?

Qualifying income generally includes gross income from self-employment and property.

This can include:

1. Sole trader income
2. UK rental income
3. Overseas property income
4. Furnished holiday let income where relevant
5. A combination of property and self-employment income

Employment income, dividends, pensions, savings interest and capital gains do not usually count towards the MTD qualifying income threshold. However, they may still need to be included in your final tax return.

This distinction matters. You may not think of yourself as a “large” business or a “large” landlord, but gross income can push you into MTD faster than expected.

If you are a landlord, FHP’s guide to Making Tax Digital for landlords is a useful next step. If your property records are already messy, an accountant landlord can help you separate income, repairs, mortgage interest, service charges and other costs before quarterly reporting becomes stressful.

What are the quarterly update deadlines?

If you use standard update periods, your MTD quarterly updates follow the tax year.

For the 2026 to 2027 tax year, the standard update periods and deadlines are:

You may also be able to use calendar update periods if your records are better aligned to calendar months.

The important point is that quarterly updates are cumulative. Each update covers the period from the start of the tax year to the end of that update period, not only the previous 3 months. This can make corrections easier because your software can roll corrected figures into the next update.

Does MTD mean you pay tax quarterly?

No. MTD quarterly updates do not mean you automatically pay Income Tax quarterly.

You still finalise your tax position after the end of the tax year and pay tax under the normal Self Assessment timetable. The main payment deadline remains 31 January.

However, quarterly updates may give you an estimated tax figure during the year. This can be helpful because it gives you time to put money aside instead of being surprised by a large tax bill.

If you are a landlord, this is especially useful where mortgage interest, repairs, agent fees and other property costs affect profit. Support with property tax accounting can help you understand the difference between cash in the bank and taxable profit.

Why landlords need to prepare carefully

Landlords face a few extra challenges under MTD.

You may have multiple properties, jointly owned properties, mortgage interest, repairs, capital improvements, service charges, letting agent statements and deposit movements. If these are not recorded properly, the quarterly updates can become difficult.

You should review:

1. Rental income by property
2. Letting agent statements
3. Mortgage interest and finance costs
4. Repairs and maintenance
5. Capital improvements
6. Insurance costs
7. Service charges and ground rent
8. Professional fees
9. Bank charges
10. Personal costs that should not be claimed

FHP’s article on filing returns for landlords is useful if you want to understand how landlord reporting fits into the wider Self Assessment process.

You may also want to read about deductible expenses for landlords and Section 24 mortgage interest if you are unsure how finance costs and property expenses should be handled.

What if you jointly own a property?

Jointly owned property needs careful handling under MTD.

Each owner needs to understand their own share of income and expenses. You should not assume that one owner’s records automatically cover everyone.

For example, if you own a rental property with your spouse, civil partner, sibling or business partner, you need a clear record of how income and expenses are shared. That information then feeds into each person’s own tax position.

FHP’s guide to Making Tax Digital jointly owned property explains why shared ownership can create extra reporting points.

If you are involved in block management, service charge accounts or residential property management, support from right to manage accountants can also help keep records clear and properly structured.

Why sole traders should not leave this until year-end

Sole traders often have a mix of regular income, irregular expenses, home office costs, mileage, subscriptions, equipment and supplier payments.

Under the old routine, you may have been able to tidy this up at the end of the year. Under MTD, that creates pressure every quarter.

The practical shift is simple. Your bookkeeping needs to become a monthly habit, not a January panic.

Working with bookkeepers Nottingham can help you keep transactions coded, reconciled and reviewed throughout the year. FHP’s bookkeeping health check is also useful if you are not sure whether your current records are good enough.

For newer businesses, FHP’s guide to choosing the right business structure at launch can help you understand how sole trader, limited company and partnership decisions affect reporting, tax and admin.

Choosing software for MTD

You need compatible software to keep digital records and submit updates to HMRC.

This does not always mean you need a complicated system. Some people will use full accounting software. Others may use spreadsheets with bridging software, provided the digital links are suitable.

What matters is that your system can:

1. Record income and expenses digitally
2. Categorise transactions correctly
3. Keep supporting evidence
4. Submit quarterly updates
5. Support corrections
6. Help with the final tax return
7. Give you useful reports during the year

Many sole traders and landlords choose cloud accounting because it keeps bank feeds, receipts, reconciliations and reports in one place. FHP’s xero bookkeeping services can help you set up and maintain a system that works for MTD rather than just year-end compliance.

If you are moving from spreadsheets, FHP’s guide on from spreadsheets to Xero is a useful starting point.

What your quarterly routine should look like

You do not need to make MTD complicated. You need a repeatable process.

A good quarterly routine might look like this:

1. Reconcile your bank feed weekly
2. Upload receipts as you go
3. Check supplier invoices before the end of each month
4. Review uncategorised transactions
5. Separate personal and business spending
6. Record mileage and home office costs regularly
7. Check property income against letting agent statements
8. Review mortgage interest and loan payments
9. Run a profit and loss report before submission
10. Speak to your accountant before filing if something looks wrong

FHP’s article on Xero bank reconciliation can help you reduce errors, while the receipt capture workflow guide is useful if paper receipts are one of your weak spots.

You can also use automations in Xero to reduce repeated admin, especially for regular rent, subscriptions, supplier invoices or recurring client payments.

Controls matter when records are updated more often

Because MTD involves regular reporting, mistakes can enter your records more often if your system has weak controls.

This is especially important if more than one person has access to your software. A bookkeeper, letting agent, director, spouse, business partner or admin assistant may all be involved.

You should review:

1. Who can add transactions
2. Who can approve payments
3. Who can edit prior periods
4. Who can submit updates
5. Who checks the figures before submission
6. How receipts and invoices are stored
7. How errors are corrected

FHP’s guide to Xero controls explains how permissions and approval workflows can reduce accidental edits.

For property managers, the same principle applies to service charge funds, client money, rents and deposits. Support with accounting property management can make the process easier to manage.

If you are responsible for managed buildings, property management accountants can also help you build clearer reporting around service charges, reserves, arrears and year-end statements.

MTD and VAT are separate, but your records need to work for both

MTD for Income Tax is separate from MTD for VAT, but the bookkeeping discipline is similar.

If you are a sole trader approaching the VAT registration threshold, your records need to track turnover properly. The UK VAT threshold is £90,000, and you should monitor it on a rolling 12-month basis.

FHP’s guide to crossing the VAT threshold explains what to do before you hit £90,000 turnover.

The main point is simple. MTD works best when your bookkeeping is not just set up for one tax rule. It should give you a clean view of income, expenses, VAT, cash flow and tax reserves.

Common MTD mistakes to avoid

MTD is manageable, but small mistakes can create unnecessary stress.

Here are the common ones to avoid:

1. Waiting until the quarterly deadline before updating records
2. Looking at profit instead of gross qualifying income
3. Assuming rental income does not count if mortgage costs are high
4. Mixing personal and business transactions in one bank account
5. Keeping paper records and digitising them later
6. Forgetting jointly owned property
7. Treating quarterly updates as final tax returns
8. Forgetting other income sources before the final return
9. Choosing software without checking MTD compatibility
10. Assuming HMRC will always write before you need to act

You should also avoid relying only on bank balance. A healthy balance may include money needed for tax, VAT, supplier bills, loan repayments or upcoming repairs. FHP’s article on HMRC late payment interest is a useful reminder of why late tax planning can become expensive.

Should you outsource the finance admin?

MTD creates more regular admin. For some people, that is manageable. For others, especially landlords with multiple properties or sole traders with mixed income streams, it becomes another job on top of running the business.

This is where outsource financial services support can help.

Outsourcing can be useful if you want help with:

1. Monthly bookkeeping
2. Bank reconciliation
3. Receipt capture
4. Management reports
5. Quarterly MTD preparation
6. Property income reporting
7. VAT monitoring
8. Cash flow planning
9. Year-end tax support
10. Software setup and controls

For small businesses, the aim is not to add complexity. It is to make the numbers reliable enough that each quarterly submission becomes a review rather than a rescue job.

A simple preparation checklist

If you are affected by MTD in 2026, start with this checklist.

1. Check your 2024 to 2025 qualifying income
2. Add together gross self-employment and property income
3. Confirm whether you need to use MTD from 6 April 2026
4. Choose compatible software
5. Set up bank feeds
6. Separate business, property and personal transactions
7. Create categories for income and expenses
8. Upload receipts and invoices digitally
9. Reconcile bank accounts weekly or monthly
10. Review jointly owned property records
11. Agree who will submit each quarterly update
12. Build a tax reserve so 31 January is not a shock

If you are still unsure whether MTD applies, speak to FHP Accounting before your first deadline. It is much easier to prepare early than to rebuild records after the quarter has ended.

FAQs

Does Making Tax Digital apply to landlords in 2026?

Yes, MTD for Income Tax applies from 6 April 2026 to individual landlords registered for Self Assessment where qualifying income from property and self-employment is over £50,000. The threshold reduces to over £30,000 from April 2027 and over £20,000 from April 2028.

Does Making Tax Digital apply to sole traders?

Yes, sole traders are included if they are registered for Self Assessment and their qualifying income is above the relevant threshold. Qualifying income is gross self-employment and property income before expenses, not taxable profit.

What is the first MTD quarterly deadline in 2026?

If you use standard update periods and must follow MTD from 6 April 2026, your first quarterly update covers 6 April to 5 July 2026 and is due by 7 August 2026.

Do quarterly updates replace the tax return?

No. Quarterly updates are summaries of income and expenses. You still need to submit a final tax return through compatible software and pay any tax due by the normal 31 January deadline.

Can I still use spreadsheets for MTD?

You may be able to use spreadsheets if they connect properly to compatible bridging software. However, you need to make sure the process maintains digital records and digital links. Many landlords and sole traders prefer cloud accounting because it is usually easier to manage throughout the year.

What happens if I miss a quarterly update?

HMRC has said it will not apply penalty points for late quarterly updates during the 2026 to 2027 tax year, but you still need to submit the updates before you can submit your tax return. After the 2026 to 2027 tax year, late quarterly updates can lead to points-based penalties.

Speak to FHP Accounting about MTD

Making Tax Digital does not need to feel overwhelming, but it does need a proper system. If your records are clean, your software is set up correctly and your quarterly routine is clear, MTD can become a manageable part of your business or property reporting.

FHP Accounting helps landlords, sole traders and property businesses prepare for MTD, improve bookkeeping and keep tax reporting under control.

If you want to check whether the new rules apply to you, review your software or prepare for your first quarterly update, speak to FHP Accounting today.

Kellee Quigley

I lead FHP Accounting, an accountancy practice specialising in Commercial and Residential Property Accounting. Our goal is to make the administration of running property portfolios easier for landlords, managers, and investors — allowing you to focus on what you do best, while we take care of everything behind the scenes.