11 June 2026
No longer earning
It might have seemed like the biggest overhaul to tax filing in a generation was never going to actually happen.
Making Tax Digital (MTD) for Income Tax has been delayed so many times that plenty of sole traders, self-employed individuals and landlords may have assumed they would retire before the changes hit.
Now that it is in effect for those with qualifying income over £50,000, it is worth understanding the intricacies of the new rules you need to follow.
Who is affected by Making Tax Digital in 2026?
April 2026 saw the first wave of sole traders, self-employed individuals and landlords pulled into scope for MTD.
On the surface, it seems like a relatively straightforward calculation to make to find out if you are currently affected.
If your gross turnover before expenses is above £50,000, then you need to follow the new rules.
What you may not have realised is when that income level is assessed.
Many believe that it is the income generated in the 2025/2026 tax year that would put you in line for a 2026 adoption of MTD.
This is not entirely wrong, earning £50,000 in that period would make you subject to MTD rules, but the reality is that the tax year in question is the 2024/2025 one.
So, if you crossed the threshold in the 2024/2025 tax year but have since dipped below it, you will still need to be compliant with MTD rules.
MTD obligations only lift once one of two criteria is met.
Firstly, you need to be below the qualifying income threshold for three consecutive years to fall out of scope for MTD.
This will be more difficult as the qualifying income threshold is dropping to £30,000 in 2027 and £20,000 in 2028.
The only other way to become MTD exempt is to stop receiving all qualifying income permanently.
If you have sold all of your rental properties, wound up your sole trader business or are now no longer self-employed following a career change, you will be MTD exempt.
This needs to be communicated to HMRC though so that you do not accidentally miss deadlines and face penalties.
How do I stay compliant with Making Tax Digital?
Whether you realised you were in the first cohort or not, you need to be following MTD rules now.
This means using a digital record system that utilises an MTD-compliant software and can link directly to HMRC systems.
You will need to submit quarterly filings along with your usual annual return, with the first new deadline being 7 August 2026.
Even if your income is currently nil, you will still need to declare this to HMRC if you know that this is likely to be restored in the future.
Many people take a step back from work for various reasons, including maternity or paternity leave, or to focus on other pursuits.
This may make keeping up with tax obligations the least of your concerns, but HMRC expect you to stay compliant.
We are here to help you understand what you need to do, no matter what is happening in your life.
Our expert tax support takes your individual circumstances and tailors advice to you rather than trying to get you to fit blanket guidance.
MTD is an exciting opportunity to get better control over your finances, but only if you can utilise it effectively.
Speak to our team to check you are fully prepared for the first MTD deadline.
