Preparing for Making Tax Digital: What Sole Traders and Landlords Need to Know

The rollout of Making Tax Digital (MTD) for Income Tax is set to bring changes for hundreds of thousands of sole traders and landlords, requiring them to adapt to new digital record-keeping and reporting standards.

From April 2026, individuals earning over £50,000 annually from self-employment or property will need to maintain digital records and submit quarterly updates to HM Revenue & Customs, replacing the current system of a single annual tax return. While the initiative aims to modernise the tax system, reduce errors, and improve efficiency, accountants caution that it could create additional administrative demands for smaller operators.

Industry research suggests that many sole traders and landlords who currently manage their own tax returns may see accountancy fees increase by 5 to 10 per cent, as firms adjust to the extra workload of quarterly reporting. With deadlines more frequent, some accountants anticipate a rise in costs due to capacity pressures across the profession.

Although penalties for missed quarterly submissions will not be enforced until April 2027, businesses may feel the impact sooner, particularly if they need to adopt paid accounting software or engage professional support for the first time. This transition highlights the importance of planning ahead to manage both time and costs effectively.

Experts and trade bodies emphasise that while modernising the tax system is widely welcomed, success will depend on clear guidance, accessible support, and practical timelines to help small businesses implement changes smoothly. By preparing in advance, sole traders and landlords can take advantage of digital tools while avoiding unnecessary stress or penalties.

As the government works to enhance compliance and close the tax gap, Making Tax Digital represents an opportunity to streamline tax reporting while ensuring that small businesses are supported through the transition.