Who Needs Making Tax Digital? UK Rules Explained

If you are asking who needs Making Tax Digital, the answer depends on what you earn, how you trade and whether you are registered for VAT. For many sole traders and landlords, the major change starts from April 2026. It is not simply a new way to send a tax return. It changes how you keep records throughout the year and how often information is sent to HMRC.

For people already juggling fares, site work, tenants, invoices and family life, the key is getting organised early. Making Tax Digital (MTD) should reduce the last-minute scramble for receipts, but only if your bookkeeping system is set up properly.

Who needs Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax Self Assessment, often called MTD for ITSA, is being introduced in stages. It applies to individuals with qualifying income from self-employment, property, or both.

From 6 April 2026, you must use MTD for Income Tax if your qualifying income was more than £50,000 in the 2024/25 tax year. From 6 April 2027, the threshold falls to more than £30,000, based on income for 2025/26.

The government has also set out plans to bring people with qualifying income above £20,000 into the system from April 2028. The rules and practical detail for that stage should be checked nearer the time, particularly if your income moves up or down from one year to the next.

Qualifying income means your gross income before expenses from:

• self-employment, such as a sole trader business or subcontracting work

• property income, including residential lets and certain commercial property income

• a combination of the two

This is not your profit. A cab driver with £55,000 of fares and business income, but £20,000 of allowable running costs, still has qualifying income above £50,000. They are likely to be mandated from April 2026, even though their taxable profit is lower.

The same applies to a landlord receiving £35,000 in rent before mortgage interest, repairs, agent fees and other costs. Their gross rental income is what counts for the threshold.

Sole traders, subcontractors and landlords

For sole traders, MTD will apply where the income threshold is met, whether you work in construction, drive a black cab, run a shop, provide professional services or operate any other unincorporated business. Construction workers paid under CIS should pay particular attention: deductions suffered under CIS do not remove the need for digital records or change the income threshold.

Landlords are also included if their gross property income takes them over the relevant threshold. This includes people whose main work is elsewhere but who receive rent from one or more properties. If you have both a trade and rental income, HMRC looks at the combined total. For example, £28,000 from self-employment plus £25,000 in rental income is £53,000 of qualifying income, bringing you within the first phase of MTD for Income Tax.

Partnership income is treated differently in the current rollout. General partnerships are not required to join MTD for Income Tax under the April 2026 and April 2027 mandates. That does not mean the position will stay that way permanently, so partners should continue to keep accurate records and watch for future announcements.

What about VAT-registered businesses?

VAT has been within Making Tax Digital for some time. If your business is VAT registered, you will normally need to keep VAT records digitally and submit VAT Returns using compatible software. This applies even where your taxable turnover is below the VAT registration threshold, if you have voluntarily registered for VAT.

In practical terms, a VAT-registered limited company, sole trader or partnership cannot usually type its figures directly into the old HMRC VAT portal. It needs software that connects to HMRC, or a compliant bridging solution where appropriate.

There are limited exemptions, for example where it is not reasonably practical to use digital tools because of age, disability, location or religious beliefs. An exemption is not automatic. It needs to be considered and agreed with HMRC.

Do limited companies need Making Tax Digital?

A limited company that is VAT registered must follow MTD for VAT rules. However, Making Tax Digital for Corporation Tax is not currently compulsory. Company directors should not confuse their company accounts and Corporation Tax return with MTD for Income Tax.

There is one important distinction. A director who also has a separate sole trade or rental property portfolio may be required to use MTD for Income Tax personally if their qualifying income exceeds the threshold. The company itself may not be in MTD for Corporation Tax, while the individual has MTD obligations for income outside the company.

This is why it pays to look at the whole picture rather than relying on a simple label such as ‘limited company director’ or ‘landlord’.

What will you have to do under MTD for Income Tax?

Once mandated, you will need compatible software to keep digital records of business and property income and expenses. You will generally send quarterly updates to HMRC, followed by an end-of-period statement for each business or property source and a final declaration after the tax year.

The quarterly updates are not four separate tax bills. They are regular submissions of the income and expense information recorded in your software. You can correct or refine figures later where necessary. The final declaration is where other personal tax matters are brought together, such as employment income, bank interest, pension contributions and capital gains where relevant.

For a busy subcontractor, this can be useful rather than burdensome. If invoices, materials, mileage, tools and CIS deductions are recorded as work happens, there is less chance of missing an expense or finding a box of paperwork in January. But software only helps when the records going into it are accurate. Bank feeds and receipt-capture apps are useful tools, not a substitute for checking the numbers.

When should you prepare?

Do not wait for HMRC’s invitation letter if you are close to the threshold. Start by reviewing your gross self-employment and property income for the relevant tax year. Remember to use turnover or rent received before expenses, and combine sources where required.

Then look at your current records. A spreadsheet may still be useful for internal planning, but it must meet digital record-keeping requirements and link properly to MTD-compatible software. Copying totals by hand between systems can create problems, especially when VAT, CIS deductions, private use or multiple rental properties are involved.

Choose a process that suits how you actually work. A landlord with a small number of properties may need a straightforward income-and-expense system. A VAT-registered construction business with staff, subcontractors and CIS returns may need bookkeeping, payroll and VAT records that work together. The right setup is the one you can maintain every week, not the most complicated package on the market.

The practical benefit of getting help early

MTD is a compliance requirement, but it can also give you a clearer view of the business. Regular records make it easier to see whether you have put enough aside for tax, whether costs are rising, and whether invoices or rent are outstanding. That is particularly valuable when cash flow is tight or work is seasonal.

Short And Sons Accountants can help clients assess whether they fall within the rules, get suitable records in place and keep on top of the reporting cycle. The aim is not to turn you into an accountant. It is to make sure the figures are right, the deadlines are met and you can get back to earning.

If your income is anywhere near the MTD thresholds, treat it as a prompt to check your records now. A calm setup before the rules apply is far easier than trying to rebuild a year of accounts when a quarterly deadline is already approaching.