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. MTD for Income Tax became mandatory on 6 April 2026 for sole traders and landlords with combined gross qualifying income above £50,000 in 2024/25, unless exempt. Further phases begin on 6 April 2027 for qualifying income above £30,000 and on 6 April 2028 for qualifying income above £20,000.
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 It aims to reduce errors through digital systems by transitioning from outdated manual processes to a more digital, real-time approach.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 preparation, MTD for Income Tax became mandatory on 6 April 2026 for qualifying sole traders and landlords, subject to exemptions.
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.
From September 2026, HMRC is signing up remaining eligible taxpayers for MTD for Income Tax in stages and notifying them. For 2026/27, the initial qualifying-income test is more than £50,000 of combined gross self-employment and property income in 2024/25, subject to exemptions. If HMRC has signed you up, follow its instructions to check your details, connect compatible software and submit any outstanding updates.
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 updates alongside an annual tax return submitted through MTD-compatible software
- 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
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Exemptions for MTD ITSA
Not all businesses are required to comply with MTD ITSA. Some reasons for an exemption include being a foster parent, not having a UK National Insurance number, or being a member of a religious society that avoids electronic communications. A disability or unreliable internet connection can also qualify you for an exemption.
Who Does Not Need to Use MTD ITSA?
You are not required to use MTD for ITSA if:
- You have a gross income from self-employment and property below £20,000
- You derive all of your income from 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
- What is a Balance Sheet or Statement of Financial Position
- What is the Higher Tax Bracket? 40% tax bracket explained
Conclusion
Tax report filing has changed. From April 2026, sole traders and landlords within scope must keep digital records and submit quarterly reports using MTD-compliant software, in addition to submitting an annual tax return. There’s no need to fear the change to quarterly reports. The right software, along with good record-keeping, will help you manage the change. HMRC will also allow you to set your own deadlines and use simplified reporting.
For small businesses under the VAT threshold, HMRC said it will offer free software for the simplest cases in the future. Now is the best time to implement digital systems and review HMRC’s requirements for MTD ITSA.
How to Prepare for MTD ITSA Now
You can prepare by:
- Reviewing your income to see if it exceeds the threshold
- Choosing an MTD compliant software
- Moving from using spreadsheets to digital records
- Aligning your accounting period
- Talking to your accountant
Preparing in advance means less disruption and can eliminate last-minute compliance issues.
FAQs
When does MTD ITSA start?
MTD for Income Tax has applied since 6 April 2026 to qualifying sole traders and landlords with gross qualifying income over £50,000 in the 2024/25 tax year, unless they qualify for an exemption. Further phases will apply from 6 April 2027 to qualifying income over £30,000 and from 6 April 2028 to qualifying income over £20,000.
What happens if I miss an MTD ITSA deadline?
The penalty depends on the type of deadline missed and the tax year. For 2026/27, late quarterly updates do not attract penalty points, but late tax returns can. Under the points-based system, reaching the applicable threshold triggers a £200 penalty, with further penalties for subsequent missed deadlines.
How do penalty points work for MTD ITSA?
For 2026/27, late quarterly updates do not attract penalty points, but a missed tax-return deadline does. Under the MTD regime, reaching four points triggers a £200 penalty, with further £200 penalties for subsequent missed submission deadlines.
How to appeal the late submission penalty for MTD ITSA?
You can appeal the late submission penalty for MTD ITSA within 30 days’ notice. You can do this online via an HMRC business tax account or offline by post using form SA370. You need to prove a reasonable excuse for the delay.
How to register for MTD ITSA?
You can sign up through GOV.UK using your Government Gateway details and compatible software. From September 2026, HMRC is signing up eligible taxpayers in stages. For 2026/27, this applies to those with over £50,000 in combined gross self-employment and property income in 2024/25, subject to exemptions. If HMRC signs you up, follow its instructions to connect your software and submit any outstanding updates.
