Making Tax Digital for Sole Traders and Landlords

Richard Jackson - 25/03/2026

What changes from April 2026?

From April 2026, the UK government is extending Making Tax Digital for Income Tax (MTD for Income Tax).

This changes how some businesses report income to HMRC.

If you:

run a business as a sole trader, or
receive rental income in your personal name

you may need to follow new digital reporting requirements.

This article outlines who is affected, what changes, and what you need to do.

Who needs to comply from April 2026?

MTD for Income Tax will apply if:

your gross income from self-employment and/or property is over £50,000 per year

This includes:

sole traders
landlords
individuals with both income sources

If your income is below this threshold, MTD will not apply yet (those with gross income between £30-£50k will come into MTD from April 2027).

What will actually change?

If you fall within MTD, you will move away from a single annual Self Assessment return.

Instead, you will need to:

Keep digital records

You must maintain your income and expense records in MTD-compatible software.

Important : You don't need expensive software if you prefer to work in spreadsheets you can continue to do so with cheap bridging software.

Submit quarterly updates

You will send a summary of your figures to HMRC every 3 months.

These are updates, not final tax calculations, NO TAX IS PAYABLE

Submit an end-of-year finalisation

At the end of the tax year, you will:

confirm your figures
make any adjustments
submit a final declaration

This replaces the traditional Self Assessment submission.

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Do you need to register for MTD?

Yes.

MTD is not automatic.

Even if you already submit a Self Assessment tax return, you will need to register separately for MTD for Income Tax.

You should only register once:

you meet the income threshold
your software is set up
you are ready to keep digital records

HMRC provides further detail on the rules and sign-up process here:

HMRC Sign-up for MTD

Can your accountant register you?

Yes.

Your accountant can usually:

register you for MTD
link your software to HMRC
submit updates on your behalf

This is done through HMRC’s agent services system.

Does this apply to limited companies?

No.

MTD for Income Tax does not apply to limited companies.

It only affects:

sole traders
individuals with income reported via Self Assessment

Summary of MTD Requirements

From April 2026, if your income exceeds £50,000 from self-employment or property, you will need to:

keep digital records
submit quarterly updates
complete an end-of-year finalisation
register for MTD separately

The tax itself does not change.

But the way you report it, and how often, does.

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Are you a business owner who would like to maximise tax savings by blending salary with dividends? If so, you might be inadvertently leaving yourself exposed to potential HMRC compliance challenges if your paperwork needs to be completed.

If you're thinking, "That's ok, my accountant takes care of that, "……err, no, they probably don't and here's why.

Your accountant will see your total drawings at the end of the year and work out the best tax treatment for the money drawn; however, you are probably taking a monthly dividend throughout the year to top up your salary. If you do this, you are overlooking one critical yet often neglected aspect, which is the need for dated individual dividend vouchers to be issued each time dividends are distributed. These vouchers serve as internal records, so they are essential for HMRC compliance.

Here's a simple litmus test for you: Have you ever received a copy of a Dividend Voucher from your accountant?

Dividend for the year ended {your company year end date} payable to holders registered on {date of meeting}. Date of payment {date of payment}.

Holding:

Dividend Rate:

Dividend Payable:

{number of shares held by shareholders} Ordinary Shares

£{amount} per share

£{amount = number of shares x dividend rate}

This voucher should be kept. It will be accepted by HM Revenue & Customs as evidence of a tax credit.

Named: RPJ Accountancy Free Tax Dividend Voucher Template

If your answer is "no," then you should take advantage of our free Dividend Voucher Template and make sure you fill it in and save it monthly.

While this might seem like an added administrative task, it's a straightforward process. Once you've set it up, it's merely a matter of changing the date and value and saving it securely so you have it readily available in case of any HMRC inquiries.

To make life easier, we offer a complimentary and user-friendly Dividend Voucher Template in Word format. To receive it, please follow these simple steps:

Enter your name and email address below.
Confirm your email address when prompted.
You will receive an email containing a download link for the template in Word format.
Once you have downloaded it, save the template and personalise it by inserting your company details in the highlighted sections.
Update the dates and values monthly and store a copy for your records.

This straightforward dividend documentation template ensures you have the necessary paperwork to substantiate your tax-efficient dividend and salary structures. This process significantly reduces the likelihood of administrative issues with HMRC – at least on the documentation front.

Stay safe - don't let incomplete paperwork leave your business vulnerable.

Secure your dividends today with our free, easy-to-use Dividend Voucher Template. Download HERE! (Google Docs)

Once downloaded, edit the template with your company details and save as a Master Copy to a local folder. Then each time you declare a dividend save a opy of your master template with the date of the dividend and edit the date and value of the dividend to be recorded. Distribute final version to shareholders receiving dividends.

If you would like a Corporation Tax Planner (Excel) click here.