How should self-employed people and landlords prepare for MTD – and what’s changed?

Recent updates have explained the new penalty rules and make it clear that obligations continue regardless of personal circumstances, including maternity leave.

What is Making Tax Digital for Income Tax?

Making Tax Digital (MTD) for Income Tax will change how sole traders and landlords report their income to HMRC. Instead of submitting one annual tax return, you’ll need to:

• Keep digital records
• Submit quarterly updates
• Complete a final end-of-year submission

This applies to those with qualifying income over the threshold when MTD comes into force.

What’s new?

Recent announcements have clarified two key areas that many people have been asking about:

1. Penalties for non-compliance

HMRC will apply a points-based penalty system for late submissions under MTD. Here’s how it works:

• You’ll receive a penalty point each time you miss a deadline
• Once you reach a points threshold, you’ll get a financial penalty
• Points expire after a period of compliance

Late payment penalties and interest will also apply if tax is not paid on time.

What this means for you:
Even occasional missed deadlines can build up quickly. Staying organised and submitting on time is essential to avoid unnecessary costs. Any taxpayers joining MTDfIT in April 2026 will not receive penalty points for late submission of their first four quarterly updates.

2. MTD still applies during maternity leave (and similar situations)

HMRC has confirmed that MTD obligations continue regardless of personal circumstances, including:

• Maternity leave
• Paternity leave
• Illness or time away from the business

What this means for you:
If you’re self-employed or a landlord, you’re still responsible for keeping records and submitting updates on time, even if your business activity is reduced or paused.

Planning ahead is key. You may need support in place to manage your obligations during these periods.

How to prepare for MTD (without repeating the basics)

If you’ve already started thinking about MTD, now is the time to move from awareness to action. Focus on these practical steps:

Get comfortable with digital record-keeping

MTD requires accurate, up-to-date digital records. This isn’t just about compliance – it helps you stay in control of your finances throughout the year.

Build a routine for quarterly updates

Quarterly reporting will be a big shift. Setting reminders and processes now will make deadlines easier to manage.

Understand your responsibilities year-round

MTD isn’t something you can pause. Whether business is busy, quiet, or temporarily on hold, your obligations remain.

Review who supports you

If you expect periods where you may not be able to manage your finances (such as maternity leave), consider who can step in and help.

Why this matters

MTD for Income Tax is more than a reporting change. It introduces:

• More frequent deadlines
• Greater visibility for HMRC
• A structured penalty system

Getting it wrong could mean avoidable penalties and added stress. Getting it right puts you in control and avoids last-minute pressure.

Need help?

If you’re unsure how MTD for Income Tax will affect you as a sole trader or landlord, or you’d like help putting the right processes in place, we’re here to support you.

Get in touch with your usual Larking Gowen contact or email enquiry@larking-gowen.co.uk

Martin Bugg