Making Tax Digital for Income Tax (MTD ITSA): who's affected and when
A factual guide to Making Tax Digital for Income Tax Self Assessment. Who qualifies, the April 2026 and April 2027 start dates, what quarterly updates involve, and what sole traders and landlords need to do.
Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is the biggest change to how UK sole traders and landlords report income in at least a decade. It replaces the familiar annual Self Assessment return with digital record-keeping, quarterly updates to HMRC, and a final declaration at year end.
The first wave goes live on 6 April 2026. The second wave follows on 6 April 2027. If you are a sole trader or landlord with qualifying income above £30,000, you will be inside this regime. This guide explains exactly who is caught, when, and what you actually have to do.
Who has to join, and when
The phased rollout is driven by "qualifying income", which for MTD purposes means gross (not net) income from self-employment and UK property, added together.
| Start date | Who must join |
|---|---|
| 6 April 2026 | Sole traders and landlords with qualifying income over £50,000 (measured in 2024/25) |
| 6 April 2027 | Sole traders and landlords with qualifying income over £30,000 (measured in 2025/26) |
| TBC | Income between £20,000 and £30,000, previously announced but date under review |
Two important points about the income threshold:
- It is gross, not profit. A landlord with £45,000 of rental income and £20,000 of expenses has £45,000 of qualifying income, not £25,000.
- It is the combined total of self-employment and property. A sole trader with £30,000 of business income and £25,000 of rental income has £55,000 of qualifying income and is in the first wave.
HMRC determines who is in the first wave based on the 2024/25 Self Assessment return filed by 31 January 2026. Taxpayers above the threshold will receive a notification from HMRC during 2025 and 2026.
Who is not affected
MTD ITSA does not apply to:
- Partnerships (general and LLP), deferred indefinitely
- Limited companies, which continue with Corporation Tax as now
- Employees with PAYE income only
- Trusts and estates
- Non-resident landlords in most cases
- Ministers of religion, Lloyd's underwriters, and a few other specialised categories
Self Assessment itself does not disappear for people below the threshold. If you earn under £30,000 from self-employment and property combined, your annual return continues as before.
What you actually have to do under MTD ITSA
Four things, in order.
1. Keep digital records
All business income and expenses must be recorded in MTD-compatible software. Spreadsheets can still be used, but only if they are linked to bridging software that submits to HMRC. Paper records and manual ledgers are no longer compliant.
"Digital records" means each transaction is captured individually with its date, amount, and category. A monthly summary figure is not enough.
2. Submit quarterly updates
Every three months, you send HMRC a summary of income and expenses for the period. The quarters are fixed:
- Q1: 6 April to 5 July → due 7 August
- Q2: 6 July to 5 October → due 7 November
- Q3: 6 October to 5 January → due 7 February
- Q4: 6 January to 5 April → due 7 May
You can elect for "calendar quarters" (ending on the last day of the month) if preferred, which most accountants will recommend for simplicity.
Quarterly updates are summary only. They do not include adjustments, accruals, or claim of reliefs. They are a rough picture of the business during the period, not a tax calculation.
3. Submit a final declaration
After the fourth quarterly update, you have until 31 January of the following year to submit a final declaration. This is the MTD ITSA equivalent of the old Self Assessment return. It is where:
- Accounting adjustments go in (capital allowances, private use adjustments, accruals, prepayments)
- Other income is reported (dividends, employment income, interest)
- Reliefs are claimed (pension contributions, Gift Aid, marriage allowance)
- The final tax liability is calculated
4. Pay your tax
Payment dates do not change. The balancing payment is due on 31 January, and payments on account remain on 31 January and 31 July. MTD ITSA is about how you report, not when you pay.
What quarterly updates are actually like
The common worry is that MTD ITSA means four tax returns a year. It does not. A quarterly update is a two-line summary of income and expenses per trade or property business. If your bookkeeping is already digital and up to date, submitting it takes about ten minutes.
The real shift is not the frequency of filing. It is the requirement to keep records digitally and up to date throughout the year. The taxpayers who will struggle with MTD are those who currently shove receipts in a shoebox and hand them to an accountant every November.
What counts as MTD-compatible software
HMRC publishes a live list of compatible software, updated regularly. Broadly, three categories:
- Full accounting software. Xero, FreeAgent, QuickBooks, Sage. Handles records, quarterly updates, and final declarations.
- Bridging software. Connects a spreadsheet to HMRC's API. Lightweight, cheap, and adequate for simple businesses.
- Specialist landlord software. Hammock, Landlord Studio, others. Designed specifically for property income.
S&J clients using our Financial IQ platform have MTD submission built in at no extra cost.
Joint property: the landlord edge case
For jointly-owned property, each owner must report their share separately. The default is 50/50 for married couples and civil partners, but a Form 17 election can change this. Unmarried joint owners report according to their beneficial ownership percentages.
Each joint owner is individually assessed against the £50,000 / £30,000 threshold based on their share. One owner can be in MTD while the other is not.
Penalties under MTD ITSA
Late submission of quarterly updates uses the new points-based penalty system. You accumulate one point per missed submission. Reach four points, and a £200 penalty applies. Additional missed submissions trigger further £200 penalties until you clear the points.
Late payment penalties are separate and continue to follow the existing regime (2% after 15 days, a further 2% after 30 days, then 4% annualised from day 31).
What to do now if you'll be in the first wave
If your 2024/25 qualifying income is above £50,000, six practical steps:
- Confirm your start date. 6 April 2026 unless HMRC notifies otherwise.
- Choose software. If you already use Xero or QuickBooks, you are fine. If you're on paper or spreadsheets, pick a platform before April 2026.
- Get your opening position clean. Any transition is easier from a tidy set of books. The last thing you want on 6 April 2026 is a year of unreconciled bank transactions.
- Set up bookkeeping as a weekly habit. Quarterly updates expose bookkeeping that is not kept current.
- Review your chart of accounts. MTD ITSA categories map to specific income and expense headings. Your software should handle this, but it is worth checking.
- Talk to your accountant about quarterly review. Many accountants are bundling quarterly bookkeeping reviews into MTD packages. Decide whether you want that support.
The bottom line
MTD ITSA is real, close, and affects a lot of people. The mechanics are less dramatic than headlines suggest. Four short updates and a final declaration is not radically more work than one annual return, provided your bookkeeping is digital and current. The taxpayers who will find it painful are those whose bookkeeping is not digital and not current. The fix is the bookkeeping, not the regime.
S&J handles MTD ITSA as part of its standard Insights and Foresight packages for sole traders and landlords, including quarterly bookkeeping reviews and final declarations. Pricing on the quote generator.