Making Tax Digital for sole traders in 2026/27

Written for the 2026/27 tax year. Checked against GOV.UK on 6 October 2026.

Making Tax Digital for Income Tax started on 6 April 2026 for sole traders and landlords whose qualifying income was over £50,000 in the 2024/25 tax year. This guide sets out who is in, what has to be sent and when, and who joins next. It comes from Wainwrights Accountants in Bromborough, Wirral. We work with sole traders across the UK.

Key figures for 2026/27

Who has had to use Making Tax Digital since 6 April 2026?

Sole traders and landlords registered for Self Assessment whose qualifying income was over £50,000 in the 2024/25 tax year, unless they are exempt. GOV.UK says they should have started using Making Tax Digital for Income Tax from 6 April 2026. Anyone in that group who has not signed up can still do so.

HMRC reviewed 2024/25 tax returns and wrote to people over the threshold. GOV.UK says that if you did not get a letter, it is still your responsibility to check if and when you need to use it.

GOV.UK also says that from September 2026 HMRC will start to sign up anyone who needs to use it for 2026/27 and has not signed themselves up.

Partnerships do not currently need to use Making Tax Digital for Income Tax. GOV.UK says they will in the future and gives no date.

What is qualifying income, and which tax year counts?

Qualifying income is your total income from self-employment and property before expenses. That means turnover, not profit. HMRC takes the figure from the Self Assessment tax return you submitted in the previous tax year. So the test for a 6 April 2026 start used the 2024/25 tax return.

Other income does not count. That includes employment (PAYE), dividends (including those from your own company), a State Pension, private pensions and your share of profit from a partnership.

GOV.UK’s example. Rental income of £25,000 and self-employment income of £27,000 give qualifying income of £52,000.

For a jointly owned property, your share of the income is what counts.

What does Making Tax Digital involve?

Three things. You create digital records of your self-employment and property income and expenses in compatible software. You send HMRC a quarterly update every 3 months for each business you have. After the tax year ends, you add any other income and submit your tax return through compatible software by 31 January.

Each digital record needs the amount, the date and the category. The categories are the same as for Self Assessment. A sole trader whose turnover from a source of self-employment is less than £90,000 can choose simpler categorisation. With more than one source, each has to be under the limit. Then each record only says whether it is income or an expense.

Quarterly updates are summaries, not tax returns. No accounting or tax adjustments are needed before an update is sent. An update is still due if there was no income and no expenses in the period.

Some things stay the same. There is still one tax return for each tax year. GOV.UK says Making Tax Digital for Income Tax does not change the way you pay tax or the dates that payments are due. Digital records are kept for at least 5 years after the 31 January deadline for the tax year.

We keep records up to date for clients through our bookkeeping service, and prepare the return through Self Assessment help.

When are the quarterly updates due in 2026/27?

The four deadlines are 7 August 2026, 7 November 2026, 7 February 2027 and 7 May 2027. The 2026/27 tax return is then due by 31 January 2028. At the time of writing, the second standard update period ended on 5 October 2026, so the next deadline is 7 November 2026.

Each update covers the tax year so far, not just the last three months.

Calendar update periods are for accounting periods that run from 1 April to 31 March. They are selected in the software before the first update is sent, and cannot be changed for that tax year once an update has gone. The deadlines are the same either way.

An update can be sent at any time from the end of the update period to the deadline. Anyone who signed up part-way through the tax year creates digital records from the start of the tax year. Those records go into the first update they send.

What software do you need for Making Tax Digital?

Software that works with Making Tax Digital for Income Tax. HMRC does not provide software and does not recommend any product or provider. One product can do everything, or bridging software can link to records kept in a spreadsheet. GOV.UK has a software finder tool. The software we use is QuickBooks, Xero or FreeAgent.

The software has to be authorised, so that it is connected to HMRC, before digital records are created.

GOV.UK says free products are available for people with simple tax affairs, and that they may have limits, such as a limited number of transactions. It also says to always check with the software provider that a product will meet your needs.

What are the penalties for a late update or tax return?

For 2026/27, HMRC will not apply penalty points for late quarterly updates. A late tax return still gets a penalty point. After 2026/27, each missed quarterly update deadline or tax return deadline gets one point. For people who are required to use it, at 4 points there is a £200 penalty, and another £200 for each further missed deadline.

The updates still have to be sent this year. The tax return cannot be submitted until they are.

There is only one point for each deadline, even for someone with more than one business. Below the 4-point threshold, HMRC removes each point automatically 24 months after the missed deadline.

Late payment penalties are separate and are not points based. For tax owed for 2026/27, there is no penalty if payment is up to 15 days late. In the first year of the new penalties, there are 30 days to pay in full or contact HMRC to set up a payment plan before penalties start. Late payment interest is charged from the first day a payment is late.

The new penalties start from the tax year a person joins. The 2025/26 tax return, due by 31 January 2027, stays under the current Self Assessment penalties.

Who is exempt from Making Tax Digital for Income Tax?

Some people are exempt automatically and others have to apply. The exemption is automatic if qualifying income is £20,000 or less, or if the person had no National Insurance number before the tax year started. People who are digitally excluded, for example because of age, a health condition or disability, can apply to HMRC.

HMRC will not accept an application if the only reason is one of these:

• a paper return was filed before
• the person is unfamiliar with accountancy software
• there are only a small number of digital records to create each tax year
• it will take extra time or cost

Some automatic exemptions last until April 2027. One example is a 2024/25 tax return that claimed qualifying care relief, such as a foster carer’s.

An exempt person keeps sending a Self Assessment tax return as normal.

Who joins in April 2027 and April 2028, and how do you check?

Qualifying income over £30,000 in 2025/26 means a start on 6 April 2027. Over £20,000 in 2026/27 means a start on 6 April 2028. GOV.UK has a tool that checks if and when you need to start. To sign up, you must be registered for Self Assessment and have submitted a tax return in the last 2 years.

So qualifying income in the current tax year decides who joins in April 2028. GOV.UK gives no thresholds or start dates after that.

Signing up uses the same user ID and password as Self Assessment. An agent can sign a client up instead.

Our Making Tax Digital compliance support is an add-on at £35 a month + VAT for sole traders and landlords. See our sole trader accountant service, our landlord accounts service and how we price our services.

For the other rates and deadlines this year, see our guide to the 2026/27 tax year. This article updates our earlier article, published in March 2025.

What do sole traders ask us about Making Tax Digital?

Do I have to use Making Tax Digital for Income Tax in 2026/27?

Only if you are a sole trader or landlord whose qualifying income was over £50,000 in 2024/25, unless you are exempt. Qualifying income is turnover from self-employment and property, before expenses.

When are the quarterly updates due?

For 2026/27, by 7 August 2026, 7 November 2026, 7 February 2027 and 7 May 2027. The second one covers 6 April to 5 October 2026, or 1 April to 30 September 2026 for calendar update periods.

Will I get a penalty if a quarterly update is late this year?

No penalty points for late quarterly updates in 2026/27. The updates still have to be sent before the tax return can be submitted, and a late tax return gets a penalty point.

Does Making Tax Digital replace the tax return?

No. There is still one tax return for each tax year, due by 31 January. Under Making Tax Digital for Income Tax it is submitted through compatible software. The 2026/27 return is due by 31 January 2028.

Can I keep using a spreadsheet?

Yes, with extra software. GOV.UK says spreadsheets can still be used for records, with software that links to them to send the quarterly updates and the tax return. This is sometimes called bridging software.

Can Wainwrights handle Making Tax Digital for me?

Yes. Making Tax Digital compliance support is an add-on at £35 a month + VAT for sole traders and landlords. The software we use is QuickBooks, Xero or FreeAgent. Book a free call to go through your own figures with an accountant.

The rules and thresholds change from one tax year to the next, and how they apply depends on your own figures. To talk yours through with an accountant in Bromborough, get a quote or book a free call.