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Business
What is Making Tax Digital for Income Tax?
Tax for sole traders is changing. Before you start worrying about the extra admin – read our run-down and find out how to prepare.
By Dan Hogan
2 minute read · 12th March 2026
Making Tax Digital for Income Tax is changing things for sole traders and landlords. Essentially, it’s the end of the shoebox of receipts.
Going forward, you’ll need to keep digital records through HMRC-recognised software, like Starling’s Making Tax Digital (MTD) for Income Tax tool. You’ll also need to use approved software to send quarterly reports to HMRC, detailing your income and expenses, and submit a self-assessment (now called a final declaration).
Who does MTD for Income Tax apply to?
People who are:
Registered to submit a self-assessment
Making money from self-employment, property – or both.
So we’re talking sole traders and landlords. Although there are a few exceptions, which you can read about on HMRC’s website.
When does MTD for Income Tax start?
Short answer: it depends on how much you earn. Let’s look at the details.
MTD for Income Tax is being rolled out in waves, according to your ‘qualifying income’ – or in other words, your total combined turnover from self-employment and property.
Step one is to look at what you earned before expenses. You’ll then be able to work out when MTD for Income tax will become mandatory for you.
| Total combined turnover | MTD for Income Tax starts |
|---|---|
| More than £50,000 in 2024/25 | From 6 April 2026 |
| More than £30,000 in 2025/26 | From 6 April 2027 |
| More than £20,000 in 2026/27 | From 6 April 2028 |
In the first wave? Make sure you’ve registered with HMRC, then have a look at what’s coming up:
Making Tax Digital: What happens next?
If you’re a sole trader or landlord earning over the £50,000 threshold, these are your deadlines:
| Date | Action |
|---|---|
| 6 April 2026 | Start keeping real-time records for 2026/2027 tax year using MTD for Income Tax software |
| 7 August 2026 | Send your first quarterly update |
| 7 November 2026 | Send your second quarterly update |
| 31 January 2027 | Submit your 2025/2026 Self Assessment tax return (just as you did before) |
| 7 February 2027 | Send your third quarterly update |
| 7 May 2027 | Send your fourth quarterly update |
| 6 April 2027 | Start records for 2027/2028 tax year |
| 7 August 2027 | Send your first quarterly update |
| 7 November 2027 | Send your second quarterly update |
| 31 January 2028 | Submit your 2026/2027 tax return straight from MTD for Income Tax software |
This means that in an ideal world, you’d have your MTD for Income Tax software all set up ready for the new financial year. That way, you can start tracking income and expenses as you go, rather than doing it all in bulk before the first deadline on 7 August 2026.
What software do I need?
Now that you know when MTD for Income Tax starts for you, your next step is choosing HMRC-recognised software so you can:
Keep digital records of your income and expenses
Send quarterly updates to HMRC
Submit your final declaration.
Starling’s MTD for Income Tax tool is HMRC-recognised and available to everyone with a Starling sole trader account – for free. Some providers charge monthly fees for their software so be sure to read the smallprint before making your decision. Starling’s tool is a free feature of Starling Accounting (coming soon).*
Can I register for MTD for Income Tax before it’s mandatory?
Yes – you can. It’s one of the many reasons we decided not to charge monthly fees for our tool.
If you earn under the £50,000 threshold, you can register voluntarily.
Signing up early?
Select the year when MTD will become mandatory for you.
Otherwise, you’ll need to submit quarterly updates and follow the new MTD rules before it becomes a legal requirement for you.
For example, by selecting 2026 to 2027 (or 2027 to 2028, available as an option from 6 April 2026), you’ll be able to get familiar with the software without linking your bank account to HMRC until MTD for Income Tax officially starts for you.
Can I use Excel instead?
No – not for your quarterly reports or final declaration. HMRC will only accept submissions from approved MTD software, unless you’re exempt.
But that doesn’t spell the end of all the systems you’ve spent years perfecting. If you use Starling’s software, you’ll be able to download your reports and feed them into your bespoke spreadsheets. Although for tracking Profit and Loss (P&L), you may want to use our built-in tool, designed to give you a detailed overview of your finances.
You may roll your eyes at the extra deadlines and software that come with MTD for Income Tax. But ultimately, the changes should mean that you gain a much better understanding of your cash flow so you can better prepare for your final tax bill. Categorise expenses as you go, review money in and out every month, keep tax money separate so you don’t dip into it – and 31 January will become just another date.
*Terms and conditions will apply to the use of Starling Accounting (coming soon).
The content and materials featured or linked in this article are for your information only and are not intended to address your particular circumstances or requirements. This information does not constitute advice in any way and should not be taken as such. If you have any questions, we recommend that you contact HMRC or speak to a qualified accountant, financial advisor and/or tax advisor.
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