Making Tax Digital for Sole Traders and Landlords: What You Need to Know Before 2026

Introduction

If you’re a sole trader or landlord in Greater Manchester, Cheshire, or Lancashire, big changes are coming to the way you handle your tax. From April 2026, HMRC will extend Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) – and it’s going to affect thousands of small businesses and property owners across our region.

In this blog, we’ll break down what’s changing, who it affects, and most importantly, what you need to do to stay compliant.

What is MTD for ITSA?

Instead of filing one annual tax return, affected businesses and landlords will:

• Keep digital records of income and expenses.
• Submit quarterly updates to HMRC via compatible software.
• Provide a final end-of-year statement (replacing the traditional Self Assessment return).

The goal, according to HMRC, is to “reduce the risk of unintentional errors, save time at year-end, and support productivity through digital tools” gov.uk.

Who Will Be Affected?

MTD for ITSA is being rolled out in phases:

• From April 2026: Sole traders and landlords with income over £50,000.
• From April 2027: Sole traders and landlords with income over £30,000.

The government has confirmed that MTD will eventually extend to those with income above £20,000, starting in April 2028 gov.uk.

Local impact

In Greater Manchester, many sole traders (from builders in Bury to hairdressers in Oldham) and landlords (with a couple of rental properties in Rochdale or Cheshire) will fall into these brackets. If your income is above the threshold, you’ll need to prepare.

Why Is This Happening?

HMRC’s reasoning is clear:

• The tax gap for Self Assessment businesses is estimated at 18.5% (£5 billion).
• Errors in tax returns are a big part of the problem.
• Using software to record transactions reduces mistakes and helps HMRC spot discrepancies earlier gov.uk.

In plain English: HMRC wants fewer errors and more accurate, timely reporting.

What Does MTD Require in Practice?

From your perspective, MTD means:

1. Digital record-keeping: Spreadsheets may not cut it unless they link directly to HMRC via bridging software.
2. Quarterly submissions: Every three months, you’ll send income and expense updates to HMRC.
3. End-of-period statement: A final declaration, confirming figures for the tax year.

This is a shift in mindset – instead of treating tax as a once-a-year headache, you’ll be reporting regularly.

Legal Framework

The rules are underpinned by the Finance (No. 2) Act 2017 (Sections 60–61 and Schedule A1, TMA 1970). Regulations such as the Income Tax (Digital Requirements) Regulations 2021 set out the technical detail. These provisions will be brought into force on 6 April 2024, ahead of the full rollout gov.uk.

What This Means for You

If you’re a sole trader

Whether you run a café in Rochdale or a consultancy from your home in Cheshire, if your income tips over £30,000 (by April 2027), you’ll need MTD-compatible software. That means saying goodbye to paper records and many traditional spreadsheets.

If you’re a landlord

Got two buy-to-lets in Middleton or a portfolio in Manchester? If your rental income exceeds £30,000, you’ll be required to join MTD by April 2027. Even if you use an agent, the reporting responsibility is yours.

Benefits (and Challenges)

Benefits

• Accuracy: Less chance of errors.
• Efficiency: No more rummaging through receipts once a year.
• Future-proofing: Digital tools can link to banking and invoicing systems.

Challenges

• Learning curve: Adapting to new software.
• Cost: Some software comes with a monthly subscription.
• Frequency: Four updates a year instead of one return.

How to Prepare

1. Check your income level: Are you over £30,000 or £50,000?
2. Choose software early: Look for HMRC-approved options (see list of software providers).
3. Start keeping digital records now: The earlier you adapt, the smoother the transition.
4. Talk to your accountant: We can help you set up systems and manage submissions.

What Happens If You Don’t Comply?

HMRC hasn’t yet published the full penalty regime for MTD ITSA, but based on MTD for VAT, expect:

• Late submission penalties under the points-based system.
• Interest charges for late payments.

Non-compliance isn’t an option – the deadlines are now set in law.

Conclusion: What’s in It for You?

At first glance, MTD looks like extra admin. But if handled properly, it can actually:

• Streamline your business records.
• Give you clearer insights into cash flow.
• Reduce tax-time stress.

In short: it’s not just about compliance – it’s about getting your finances in better shape.

If you’re a sole trader or landlord in Greater Manchester, Cheshire, or Lancashire, now is the time to get ready for MTD. At CCM | Carter Collins & Myer, we can help you choose the right software, set up digital records, and make sure your quarterly submissions are stress-free.

Get in touch with us today and let’s prepare your business for 2026.