In the last year, there have been substantial changes to the way that tax returns are filed. With the introduction of Making Tax Digital, sole traders and landlords with a qualifying income over £50,000 are now required to keep digital records and submit quarterly updates, effectively replacing the traditional annual tax return for this income.
At Tax Driven Accountants, we have had many questions about Making Tax Digital, with a common misconception being that MTD has made Self Assessments obsolete, but that is not the case at all.
Keep reading to find out how Making Tax Digital has changed Self Assessment tax returns in 2026.
What HMRC Self Assessment Used to Look Like
Before Making Tax Digital, Self Assessment was only something that you had to worry about annually, and you could also keep a record of your finances however you saw fit, whether through a shoe box of receipts or spreadsheets, but that has all changed since the introduction of Making Tax Digital.
Making Tax Digital: The Shift Explained
The shift to Making Tax Digital was taken for a number of reasons; this includes:
Reduction of Errors
Making Tax Digital was introduced mainly to reduce errors in filed taxes. With many sole traders still relying on physical records, errors were easy to make, resulting in individuals underpaying or overpaying their tax liabilities. With a quarterly digital report required, the likelihood of mistakes has been greatly reduced, helping to reduce the tax gap and ensure everyone pays what they owe.
Digitisation
While every other aspect of life seemed to be stepping into the modern world, the way that taxes were reported had fallen behind. Digitisation reduces human error and enables businesses to perform real-time reporting, creating a more transparent tax experience and streamlining the administrative burden.
If you’d like to know more about the income thresholds for Making Tax Digital and when it rolled out, check out our complete guide to Making Tax Digital.
Who Needs to File Under Making Tax Digital for Income Tax?
It’s important to note that not everyone is required to file quarterly reports under Making Tax Digital, and new regulations only apply to the following:
Sole Traders and Landlords
If you’re a sole trader or landlord registered for Self Assessment with a gross qualifying income exceeding £50,000. This is the gross income threshold currently in place as of 2026, but it is set to be lowered in 2027.
Corporate structures, partnerships, trusts, and estates are currently exempt from Making Tax Digital for income tax, but this may not be the case in the future.
If you’re a sole trader or landlord struggling with recent changes, we would suggest working with a Making Tax Digital accountant who can help you navigate recent changes.
What’s Actually Different: Old Way vs MTD Way
Many are finding it difficult to understand what has changed, as for the most part the changes between Self Assessment and Making Tax Digital are not substantial; here’s what’s actually different.
Annual Return vs Quarterly Updates
A traditional Self Assessment only required one annual return, filed by January 31st following the end of the tax year. This means that if you fell behind on your accounting, you had a whole 12 months to either amend your accounts yourself or seek the support of a Self Assessment accountant.
Under Making Tax Digital, you are now required to keep digital records of your accounts on verified software and submit quarterly updates to HMRC, plus a final year-end declaration by the 31st January, which means instead of one filing, sole traders and landlords must now file up to five times a year, requiring individuals to be more aware of their finances.
Paper Records vs Digital Record Keeping
Many businesses are yet to shift away from paper records, preferring to keep their accounts in the old-fashioned way. Though there are plenty of people who are perfectly capable of keeping accurate paper records, the number of mistakes is creating a tax gap, with some people paying too much or too little.
HMRC is now trying to completely phase out paper records in favour of digital record-keeping through approved software, finally bringing taxes into the modern digital world.
HMRC’s Calculator vs Approved Software
Previously, many traders would use HMRC’s online web-based tools for filing certain tax returns, but these have now been permanently closed, and you are not required to use HMRC-recognised software to submit your returns. This means businesses must legally shift from manual data entry to software-driven bookkeeping.
One Deadline vs Four
For standard Self Assessment tax returns, you only have one deadline to worry about, but with Making Tax Digital, you have four deadlines that you have to meet, as well as the final end-of-year declaration, meaning that you have to think a lot more about your accounting.
For this reason, many more sole traders and landlords are now choosing to work with an accountant to ensure they remain compliant with their new tax obligations.
What Stays the Same
Some of the responsibilities that remain the same after the introduction of Making Tax Digital include:
Payment Deadlines:
The dates for paying your tax bill are unchanged. Payments are still due by midnight on 31 January (following the end of the tax year) for your balancing payment and first payment on account, and 31 July for your second payment on account.
Tax Rates, Allowances, & Reliefs:
All personal allowances, trading allowances, and tax bands work exactly as before.
PAYE & Employment Income:
Your employment income continues to be handled through your PAYE tax code as normal.
Non-MTD Income Streams:
Any income sources not included in MTD, such as capital gains, dividends, foreign income, or trust income, will continue to be reported through the traditional Self Assessment process.
Key Deadlines for 2026 Self Assessment and MTD
Some of the key deadlines that you should be aware of as a sole trader include:
| Deadline | Date | Applies to |
| Register for Self Assessment (new filers) | 5 October 2026 | Anyone filing for 2025/26 for the first time |
| Paper tax return deadline | 31 October 2026 | 2025/26 Self Assessment (only usable if tax bill is under £3,000) |
| Deadline to opt into PAYE tax code collection | 30 December 2026 | Those who owe less than £3,000 and file online, wanting it collected via PAYE rather than a lump sum |
| Online tax return deadline | 31 January 2027 | 2025/26 Self Assessment |
| Balancing payment deadline | 31 January 2027 | Any tax owed for 2025/26 |
| First payment on account | 31 January 2027 | 2026/27 tax year, where applicable |
| Second payment on account | 31 July 2027 | 2026/27 tax year, where applicable |
| MTD for Income Tax becomes mandatory | 6 April 2026 | Sole traders/landlords with qualifying income over £50,000 (based on 2024/25 return) |
| MTD threshold drops to £30,000 | 6 April 2027 | Based on 2025/26 qualifying income |
| MTD threshold drops to £20,000 | 6 April 2028 | Based on 2026/27 qualifying income |
How to Complete Your Return Under the New Rules
Filing under Making Tax Digital looks quite different to the process most sole traders and landlords are used to, so it helps to break it down into stages rather than treating it as one big task.
Registering and Choosing Software
First, you need to register for Making Tax Digital for Income Tax and choose HMRC-recognised software to keep your digital records. From there, every piece of income and expenditure needs to be logged as it happens, rather than gathered together at the end of the year.
Submitting Your Quarterly Updates
Every quarter, your software will generate a summary of your income and expenses, which you then submit to HMRC. These updates are cumulative snapshots of your trading position, not final tax calculations, so there is no need to panic if a quarter looks slightly off. Any corrections can be made in a later update or at the final declaration stage.
Completing the Final Declaration
The final step is the year-end declaration, submitted by the 31st January following the end of the tax year. This is where you confirm your total income, add any allowances or reliefs, and finalise the amount of tax owed. Think of the quarterly updates as keeping HMRC informed throughout the year, with the final declaration acting as the true reconciliation.
Common Mistakes Since MTD Was Introduced
Since MTD was rolled out, a handful of avoidable errors keep cropping up, often from people trying to adapt old habits to a new system rather than starting fresh.
Leaving Quarterly Updates Too Late
The most common mistake is leaving quarterly updates until the last minute, in the same way many people used to leave their Self Assessment until January. With four deadlines a year instead of one, this approach quickly becomes unmanageable and increases the risk of errors slipping through.
Choosing the Wrong Software
Another frequent issue is choosing software based on price alone rather than compatibility with your type of income. Landlords with multiple properties or sole traders with several income streams often need software that can handle more complex record-keeping, and switching part-way through the year causes unnecessary headaches.
Keeping Paper Records “Just in Case”
Some traders are also still trying to keep a parallel paper record just in case, which defeats the purpose of digital record-keeping and often leads to figures not matching between the two systems.
Confusing Quarterly Updates With Paying Tax
Others assume that submitting a quarterly update is the same as paying tax, when in fact these updates simply keep HMRC informed. This misunderstanding has led to a few unwelcome surprises when the final bill comes due at year-end.
Underestimating Real-Time Categorisation
Many people underestimate how much MTD relies on accurate categorisation of expenses as they happen. Sorting through months of receipts to fit the new system is far more time-consuming than logging things in real time, and it is one of the main reasons people are turning to accountants for support during the transition.
Get The Support You Need With Tax Driven Accountants
Through this guide, you should now have a clearer understanding of how Self Assessments have changed and what new Making Tax Guidelines expect from sole traders.
If you have struggled with the recent changes and you are worried you won’t be able to keep up with new quarterly reports, you’re in the right place. When you work with Tax Driven Accountants, we handle all of your accounting needs, ensuring you remain compliant.
Get in touch with us today to see how we can ease your accounting burden.
