Making Tax Digital for Income Tax — what changes from April 2026

Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) became mandatory on 6 April 2026 for sole traders and landlords with combined gross business and property income over £50,000. From that date, affected taxpayers must keep digital records, submit quarterly updates to HMRC via compatible software, and file a final annual declaration. The threshold drops to £30,000 from April 2027 and £20,000 from April 2028. Partnerships are excluded for now. This is one of the biggest operational changes to UK self-assessment in a generation.

This walks through who’s affected, how the new quarterly cycle works, the software question, and what to do if you’re in scope.

What MTD ITSA is

MTD ITSA replaces the annual paper-or-online Self-Assessment return with a four-step quarterly cycle:

1. Keep digital records of income and expenses (no more paper-based ledgers).
2. Submit quarterly updates to HMRC showing income and expense totals for the quarter.
3. Submit an end-of-period statement (EOPS) and final declaration by 31 January following the tax year.
4. Pay the tax by 31 January as before.

The annual return doesn’t disappear entirely — the final declaration is a kind of annual reconciliation. But the quarterly submissions are new and substantive.

Who’s mandated from 6 April 2026

The current rules (effective 6 April 2026):

• Sole traders and landlords with combined gross income above £50,000 for the 2024/25 tax year (the most recent year with completed accounts at the implementation date).
• All trading and property income aggregated — if you have £30,000 of self-employment and £25,000 of rental, your £55,000 combined puts you in scope.
• The mandate applies from 6 April 2026 — the start of the 2026/27 tax year.

Excluded from initial mandation:

• Partnerships (joining at a later, undefined date).
• Sole traders / landlords with combined income at or below £50,000 (joining when the threshold drops to £30,000 in April 2027, then £20,000 in April 2028).
• Some specific exemptions (under-18s, certain digitally-excluded individuals).
• Employees with no trading or rental income — not in MTD ITSA scope regardless of salary.

For someone close to the threshold, the exact calculation matters. HMRC’s detailed guidance is at gov.uk: Making Tax Digital for Income Tax.

The quarterly cycle

Under MTD ITSA the tax year is divided into four quarterly “update periods”:

• Q1: 6 April – 5 July. Submission due: 5 August.
• Q2: 6 July – 5 October. Submission due: 5 November.
• Q3: 6 October – 5 January. Submission due: 5 February.
• Q4: 6 January – 5 April. Submission due: 5 May.

Each quarterly submission shows totals of income and allowable expenses for the period. The submissions are cumulative year-to-date under the standardised reporting format — meaning Q3 actually reports 9 months of data (April–January), not just the 3 months. HMRC sees a running picture across the year.

After 5 April, the end-of-period statement and final declaration are due by 31 January following the tax year end — for 2026/27, that’s 31 January 2028.

You’ll need compatible software

MTD ITSA submissions must be made via HMRC-compatible software. Manual entry to HMRC’s own portal isn’t available — software is mandatory.

Approved software options at launch include:

• Xero, QuickBooks, FreeAgent — established accounting platforms.
• Sage Business Cloud.
• HMRC’s own free software (limited functionality, suitable for very simple returns).
• A growing range of MTD-specific apps for landlords and freelancers.

HMRC maintains a list of approved software at gov.uk: Find software.

Typical software costs:

• Free: HMRC’s basic tool (very limited).
• £5–£15/month: simple landlord and sole-trader-focused apps.
• £15–£30/month: full accounting platforms (Xero, QuickBooks, FreeAgent).

For most sole traders and landlords, the £5–£15/month tier is sufficient.

Bridging software for spreadsheet users

If you keep accounts in a spreadsheet, you don’t need to abandon it — but you do need bridging software to submit data to HMRC. Bridging tools connect your spreadsheet to HMRC’s systems and handle the submission.

Common bridging options:

• Tax Calc.
• 123 Sheets (specifically for spreadsheet users).
• Comma and similar.

This route works but requires careful spreadsheet structure. Most users find dedicated software easier in the long run.

What about Self Assessment?

For people in MTD ITSA:

• The traditional annual Self Assessment return is replaced by the quarterly updates + final declaration.
• The end-of-period statement and final declaration together perform the same role as the old annual SA100.
• Payment deadlines (31 January) are unchanged.
• Payments on account (31 January and 31 July) are unchanged.

For people NOT in MTD ITSA (below £50,000 in 2026/27):

• Continue with standard annual Self Assessment.
• No quarterly submissions needed.
• Same 31 January deadline and process.

What you need to do if you’re in scope

A practical checklist:

Before 6 April 2026 (already passed for 2026/27)

• Confirm whether you exceeded the £50,000 threshold in 2024/25.
• HMRC should have written to affected taxpayers with notification.
• Choose and set up compatible software.
• Move record-keeping to digital format.

From 6 April 2026 onward

• Keep digital records of all income and expenses in real time.
• Submit Q1 update by 5 August 2026 (covering April-July 2026).
• Submit Q2 by 5 November 2026.
• Submit Q3 by 5 February 2027.
• Submit Q4 by 5 May 2027.
• Final declaration by 31 January 2028.

Penalties for non-compliance

MTD ITSA introduces a points-based penalty system:

• One missed quarterly submission: 1 penalty point.
• Accumulate points and you trigger a £200 fixed penalty.
• Penalty points expire after 24 months of compliance.

This is materially more lenient than the previous “£100 immediate penalty” for late annual returns. HMRC has positioned this as a learning grace for the new system.

Late payment penalties remain at 2–4% of the unpaid tax depending on how late.

What if I’m exempt?

HMRC has specific exemptions for individuals who can’t reasonably comply:

• Digitally excluded individuals (no internet, no compatible device).
• Religious objection to digital records (rare but recognised).
• Disabled individuals unable to use digital tools.
• Trustees, non-resident companies, certain other narrow categories.

Exemption requires application to HMRC with supporting reasons. Most ordinary sole traders and landlords don’t qualify.

Worked example: landlord with rental income

Priya owns a buy-to-let portfolio generating £60,000 gross rental income annually. She has no other business income.

Position from 6 April 2026:

• Combined gross income: £60,000 (above £50,000 threshold).
• In scope of MTD ITSA.
• Must submit quarterly updates for the property business.

Practical steps:

• Subscribes to a landlord-focused MTD app at £10/month.
• Records all rental income and allowable expenses in real time through the app.
• Submits Q1 update by 5 August 2026.
• Continues quarterly cycle through the year.
• Final declaration by 31 January 2028.

Annual cost: ~£120/year for the software. Tax payable is the same as under the old Self Assessment system — only the reporting process has changed.

Worked example: sole trader below the threshold

Tom is a freelance graphic designer with £35,000 of self-employed income. He’s NOT in scope for MTD ITSA in 2026/27 because his combined income is below £50,000.

Position:

• Continues with standard annual Self Assessment.
• Files SA100 by 31 January 2028 for 2026/27.

From 6 April 2027 (when threshold drops to £30,000):

• Tom’s £35,000 income puts him in scope.
• He’d need to start MTD compliance for the 2027/28 tax year.

The phased threshold drop catches more people over time — by April 2028, anyone with £20,000+ of combined trading and rental income is in scope.

Internal links

• How do I file a self assessment tax return for the first time?
• What expenses can I claim as self employed UK?
• How much tax do I pay on rental income UK?

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This guide is information, not regulated financial advice. MTD ITSA is mandatory and penalties apply for non-compliance — verify your obligations on gov.uk: Making Tax Digital for Income Tax or speak to a qualified accountant.