Starting a Business in 2026: When MTD Applies

If you start a new business in 2026, MTD for a new business normally does not apply in your first months, because HMRC decides who must join by checking a tax return you have already filed. Your first return sets the clock: in most cases the earliest you could be brought in is the 6 April after that return's 31 January deadline. Most guides list the national start dates and stop there. This one maps those dates onto the month you actually started trading.

Key takeaways

• HMRC uses the qualifying income on a filed Self Assessment return to decide when you must start MTD.
• A business started during 2026/27 normally files its first return by 31 January 2028, which points to 6 April 2028 at the earliest.
• Qualifying income means gross takings from self-employment and property, not profit.
• Keeping digital records from your first sale costs little and removes the stress of switching later.

What does "MTD for a new business" actually mean?

Making Tax Digital for Income Tax is HMRC's system for sole traders and landlords. Once you are in, you keep digital records and send quarterly updates through compatible software, then finish the year with a final declaration. The phased start dates are fixed: from 6 April 2026 if your qualifying income for 2024/25 was over £50,000; from 6 April 2027 if it was over £30,000 for 2025/26; and from 6 April 2028 if it was over £20,000 for 2026/27.

Those dates are built around a tax return. HMRC's eligibility guidance says it will review your Self Assessment return and check your qualifying income each tax year, then write to you if you need to start. It also confirms that you still file a normal Self Assessment return for the year before you start MTD. For someone who has only just started trading, that is the key point: no filed return, no test.

Your start month mapped to MTD

The table below applies the published phasing to the date you began trading. It assumes this is your first self-employment or property income and that the thresholds stay as announced.

If your 2025/26 income is under £30,000, you are not finished with the test. Your 2026/27 return is checked against the £20,000 threshold, so a business that grows in its second year can still be brought in from 6 April 2028.

A first-year checklist for new sole traders

1. Register for Self Assessment on time. You normally need to register by 5 October after the end of the tax year in which you started. Our guide to the registration deadline covers the steps.
2. Record gross takings, not just profit. Your qualifying income figure is the total before expenses. Keep sales and costs in separate columns from the first week.
3. Add up any rental income. Property income counts towards the same threshold, so a small let plus a new business can tip you over.
4. Keep records digitally from day one. A spreadsheet or bookkeeping app is enough to begin with. Our spreadsheet guide explains what MTD will later expect.
5. Open a separate bank account. It makes gross income far easier to total and check.
6. Review your figures after filing each return. Compare your qualifying income with the threshold for that year, and diary the 6 April it points to.
7. Pick software early if you are close. If you expect to cross the line, choose software in the autumn before your start date rather than in March.

Illustrative example: a mobile dog groomer

This is an illustrative example with an invented profile and figures, not a real client. Sam starts a mobile dog grooming business on 1 November 2026, while working three days a week as an employee. From November to the following 5 April, Sam takes £9,500 in fees and spends £3,800 on van costs, shampoo and equipment.

• First tax year: 2026/27. Sam registers for Self Assessment by 5 October 2027 and files the 2026/27 return by 31 January 2028.
• Qualifying income on that return: £9,500. The salary does not count. £9,500 is below £20,000, so Sam is not required to start MTD on 6 April 2028.
• Second year: the business grows. In 2027/28, Sam takes £23,000 in fees. Once the 2027/28 return is filed, that figure is tested against the threshold then in force. On the current £20,000 figure, Sam would expect to start MTD from 6 April 2029, subject to HMRC's confirmation.

The useful lesson is timing. Sam has well over a year between the business taking off and needing quarterly updates. Because Sam kept digital records from the first booking, the switch is a software setting rather than a rescue job.

Common mistakes

• Testing profit instead of turnover. A busy business with high costs can still be over the line. See what counts as qualifying income.
• Assuming a new business is exempt forever. The first return only delays the test. Each later return is checked too.
• Forgetting the Self Assessment return. Joining MTD later does not remove the return for the year before. Late filing still brings penalties.
• Mixing personal and business spending. Untangling one account at the end of the year makes your takings figure harder to prove.
• Ignoring property income. A rented room or flat can count towards the same total. Read our MTD for landlords guide if this applies.

What about existing traders who start a second business?

The test looks at all your qualifying income, not at each business separately. If you already file returns as a sole trader and start a second venture, the new income is added to the old on your next return. That can bring you into MTD sooner than the "new business" dates above, because you already have a return to test. Our guide to multiple income sources explains how the totals combine.

How we can help

We help new sole traders set up simple digital records from the start and keep an eye on the threshold each year. MTD compliance starts from £49/month and bookkeeping from £150/month on fixed fees. See our MTD compliance service, check our pricing, or contact us with the date you started trading.