Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) will change the way millions of self-employed individuals and landlords report their income tax to HMRC. It’ll become mandatory from April 2026.
Let’s explore what MTD for ITSA is, its background, how to sign up, quarterly reporting, its impacts, key requirements, exemptions, and what to do to stay compliant.
What is Making Tax Digital?
Making Tax Digital (MTD) is an HMRC initiative to modernise the UK tax system. It involves keeping records digitally and submitting taxes using MTD-compatible software. It aims to reduce errors through digital systems by transitioning from outdated manual processes to a more digital, real-time approach.
Background to Making Tax Digital
The first stage of MTD was Making Tax Digital for VAT (MTD for VAT), which started in 2019. Initially, it required some VAT-registered businesses to keep digital records and use MTD-compatible software to submit their VAT returns online. It was updated on 1 April 2022, requiring all VAT-registered businesses to submit VAT returns through MTD software.
Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is the next phase that will affect self-employed individuals and landlords. Following a period of thorough preparation, it will now be mandatory starting on 6 April 2026.
Currently, MTD doesn’t apply to other taxes, though there have been discussions about extending it to Partnerships and Corporation Tax.
Who is Likely to be Affected by MTD for ITSA
Landlords and sole traders must follow MTD ITSA if their combined gross income from self-employment and property exceeds the relevant threshold for their start year.
Gross income means turnover before expenses.
PAYE employment income, dividends, and savings interest do not count toward the threshold.
MTD For Income Tax Self Assessment (MTD ITSA)
MTD ITSA requires sole traders and landlords with total gross self-employment or property income over £50,000 to report digitally from April 6, 2026.
​You must use MTD for Income Tax reporting if your turnover from self-employment or property exceeds the threshold for your start year.
- From 6 April 2026: If your total sole trade or property income is over £50,000, you need to comply from this date.
- From 6 April 2027: If your total self-employment or property income is between £30,000 and £50,000, your obligation starts this year.
- From 6 April 2028: If your turnover is above £20,000, you’ll join later.
What you’ll need to Sign Up for MTD ITSA
To sign up for MTD ITSA, you need:
- Government gateway ID & password
- Already registered for self-assessment
- National Insurance number
- MTD-compatible software (Xero, FreeAgent or other)
During the process, you’ll mention:
- Business name
- Email address
- Business start date and registered address
- Accounting period
- Accounting type
- The tax year you would like to start using MTD for Income Tax.
How to Sign Up for MTD ITSA
You must already be registered for Self Assessment and have submitted a tax return in the last two years. To sign up, provide identity proof and follow these simple steps:
- Go to the official GOV.UK Page to Sign up for MTD ITSA
- Sign in with your Government Gateway details.
- Confirm your personal details and income sources.
- Enter your details in the MTD-compatible software.
- Complete registration to finish sign-up.
Agents should use their Agent Services Account to sign up. Voluntary sign-up is open for practice.
Quarterly Reporting for MTD ITSA
Do you have various income streams from business or property? Then you will need separate quarterly updates for each. Not to worry, these are not full accounts, but just what’s coming in and going out.
If using the tax-year-aligned reporting (April 6 – April 5), the deadlines are:
- First quarter (6 April–5 July): Due 7 August.
- Second quarter (6 July–5 October): Due 7 November.
- Third quarter (6 October–5 January): Due 7 February.
- Fourth quarter (6 January–5 April): Due 7 May.
What Happens at the End of the Tax Year?
Quarterly updates are not your final tax return.
At the end of the tax year, you must:
- Submit an End of Period Statement (EOPS) for each business or property income source.
- Submit a Final Declaration to confirm all income, including PAYE, dividends, and savings.
The Final Declaration replaces the current Self Assessment tax return. Your final tax liability is calculated after this submission.
Additional Resources
Impacts of MTD for Income Tax Self-Assessment
Here are some of the major impacts of MTD for ITSA based on HMRC assessments:
MTD ITSA will require:
- Quarterly submissions instead of one annual tax return
- Continuous digital record-keeping
- Additional administrative time
- Potential software costs
However, it may also improve:
- Cash flow visibility
- Real-time income tracking
- Reduced year-end pressure
Expert Self-Assessment Services
Switch to Digital Self-Assessment — Stress-Free and On Time
Whether you’re a landlord, sole trader, freelancer, or have multiple income streams, we ensure correct filings, maximum reliefs, and zero last-minute panic
Exemptions for MTD for ITSA
Not everyone must comply. You’re exempt if you’re a foster parent, lack a UK National Insurance number, or are in a religious society that avoids electronic communication. If you have unreliable internet or a disability, you can apply for an exemption.
Who Does Not Need to Use MTD ITSA?
You do not need to comply if:
- Your combined gross self-employment and property income is below £20,000
- You only earn income through PAYE employment
- You are a company director receiving only dividends
- You qualify for a digital exemption approved by HMRC
What to Track on MTD for ITSA
Here’s what MTD for ITSA means for your records: all must be maintained digitally using HMRC-approved software.
Here’s what you need to track:
- Business Basics
- Your business name and address
- Income and expense categories
- Time and value of each transaction
- Daily takings (if you’re running a shop)
Affected Individuals Need to
The software needs to be able to handle these tasks and do the following:
- Store all digital records.
- Send quarterly HMRC updates.
- End of Period Returns
- Final Declaration
Conclusion
Tax reporting is changing. In April 2026, you’ll use new methods with HMRC for income tax and self-assessment. Worried about switching to quarterly updates? Don’t be. The right software and good record-keeping make it manageable. HMRC also offers options like choosing your own deadlines or using simplified reporting.
For small businesses under the VAT threshold, HMRC has indicated that free software may be available for the simplest cases. ​Want to succeed with MTD ITSA? Start now. Set up your digital systems early and review HMRC requirements for a smoother transition.
How to Prepare for MTD ITSA Now
You can prepare by:
- Reviewing whether your income exceeds the threshold
- Choosing MTD-compatible software
- Moving from spreadsheets to digital record-keeping
- Aligning your accounting period
- Speaking to your accountant before April 2026
Preparing early reduces disruption and avoids last-minute compliance issues.
FAQs
When does MTD ITSA start?
It’ll start in phases. The first phase will begin on 6 April 2026. The second phase will start on 6 April 2027, and the third phase will begin on 6 April 2028.
What happens if I miss an MTD ITSA deadline?
If you miss the deadline of MTD ITSA, you’ll be subject to a points-based penalty.
How do penalty points work, MTD ITSA?
You’ll earn one point against each late submission. When you have 4 points for quarterly updates, you will incur a £200 fine.
How to appeal the late submission penalty MTD ITSA?
You can appeal for the late submission penalty of MTD ITSA within 30 days’ notice. You can do it via an online HMRC business tax account or offline by post through form SA370. You need to prove a reasonable excuse for the delay.
How to register for MTD ITSA?
To register for MTD ITSA, you must already be registered for a Self Assessment and have submitted a return in the previous 2 years. Log in to the Government Gateway using your user ID and submit the details to receive confirmation.
