Making Tax Digital (MTD) for Income Tax is one of the biggest changes to how landlords and self-employed individuals manage their tax affairs. But who exactly needs to comply, and when?
The key groups affected
MTD doesn’t apply to everyone just yet. Instead, HMRC is phasing in the rules based on your type of income and how much you earn. The main groups are:
- Landlords – If you earn rental income above £50,000, you’ll need to comply from April 2026. This includes landlords with single properties, multiple rental homes, or portfolios. Those earning over £30,000 will be brought in from April 2027, and over £20,000 from April 2028.
- Self-employed business owners – Sole traders with income above the same thresholds (£50,000 from April 2026, £30,000 from April 2027, £20,000 from April 2028) will also need to comply.
- Individuals with combined property and business income – HMRC looks at your total qualifying income from property and self-employment. If the combined amount crosses the threshold, you’ll be required to comply.
Industries most likely to be affected
While MTD is focused on the type of income rather than industry, certain sectors will feel the impact more than others:
- Property and landlords – Including private landlords, those letting through agencies, and individuals with multiple rental properties.
- Trades and construction – Many builders, electricians, plumbers, and contractors operate as sole traders and will need to comply.
- Freelancers and creatives – Designers, writers, consultants, and similar professions who manage their own business income.
- Hospitality and retail sole traders – Café owners, independent shopkeepers, market traders, and similar businesses.
- Transport and logistics – Self-employed drivers and couriers whose earnings exceed the thresholds.
Who is not yet affected?
- Partnerships and LLPs are excluded for now.
- Those with income below £20,000 won’t need to comply when the final rollout stage arrives.
- Some exemptions apply in cases where digital record keeping isn’t possible due to age, disability, or remote location.
Why landlords should prepare now
For landlords in particular, MTD will change the way rental income is tracked and reported. Digital records of rent, expenses, and property-related costs will need to be kept in HMRC-recognised software like Xero, with quarterly updates replacing the annual self-assessment return. This shift will affect even those with relatively straightforward property income.
Next steps
If you’re a landlord or sole trader earning over £50,000, MTD will apply to you from 6 April 2026. Those earning less but above £30,000 should prepare for 2027. Even if you’re not immediately affected, moving to digital record keeping now will save time, reduce errors, and help you get comfortable before deadlines apply.
At Cottons, we’re already supporting landlords and self-employed clients through this transition. Our team of Digital Champions can guide you onto Xero, train you in digital record keeping, and make sure you’re fully prepared for quarterly submissions.
