Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is now live for the first group of taxpayers from April 2026.
If you are a sole trader or landlord with income over 50,000 per year, the way you report your income to HMRC has changed. Quarterly digital submissions are now required, and the annual Self Assessment tax return as you knew it is being phased out.
This guide explains what MTD for ITSA means in practice, who is affected in 2026, what you need to do, and what happens if you do not comply.
1. What Is Making Tax Digital for Income Tax?
Making Tax Digital is HMRC’s programme to move the UK tax system to fully digital record-keeping and reporting. MTD for VAT has been in place since 2019. MTD for Income Tax is the next phase.
Under MTD for ITSA, affected taxpayers are required to:
- Keep digital records of their income and expenses using HMRC-compatible software
- Submit quarterly updates to HMRC containing a summary of their income and expenses for that period
- Submit a final declaration at the end of the tax year to confirm the figures and claim any reliefs or allowances
The quarterly updates do not create a quarterly tax bill. Tax is still calculated and paid on the usual Self Assessment schedule. But the updates give HMRC more frequent visibility of your financial position throughout the year.
2. Who Is Affected in 2026?
| From | Who Must Comply |
| April 2026 | Sole traders and landlords with income over 50,000 |
| April 2027 | Sole traders and landlords with income over 30,000 |
| April 2028 (proposed) | Sole traders and landlords with income over 20,000 |
Income here refers to the gross business and property income before expenses. If you have more than one source of income, for example a trade and rental property, the 50,000 threshold applies to the combined total.
If you are a limited company director, MTD for ITSA applies to any income you receive as a sole trader or from property, not to income from the company itself. Corporation tax has its own separate digital reporting roadmap.
3. What Digital Records Do You Need to Keep?
HMRC-compatible software must be used to record all business income and expenses. You cannot use standard spreadsheets unless they are connected to HMRC via bridging software.
Your digital records must include:
- All sales and income received in the period
- All business expenses, categorised by type
- Property income and related expenses if applicable
- Bank transactions reconciled against your records
Popular software options that are HMRC-compatible include Xero, QuickBooks, FreeAgent, and Sage. If you are already using accounting software for VAT or bookkeeping, check with your provider whether it supports MTD for ITSA submissions.
4. What Are the Quarterly Submission Deadlines?
| Quarter | Period Covered | Submission Deadline |
| Q1 | 6 April to 5 July | 5 August |
| Q2 | 6 July to 5 October | 5 November |
| Q3 | 6 October to 5 January | 5 February |
| Q4 | 6 January to 5 April | 5 May |
A final declaration, replacing the previous Self Assessment tax return, is due by 31 January following the end of the tax year. This is where you confirm your total income, claim allowances and reliefs, and settle any tax due.
5. What Happens If You Do Not Comply?
HMRC has introduced a new points-based penalty system for MTD for ITSA late submissions. Each missed quarterly submission adds a penalty point to your account. Once you reach a threshold, a financial penalty is charged.
For quarterly filers, the threshold is four penalty points. At this level, a 200 fixed penalty is triggered. Further penalties apply for each subsequent late submission until your record is cleared.
Additionally, late payment penalties and interest apply to any tax paid after the 31 January deadline, as they do under the current Self Assessment system.
HMRC is offering a soft-landing period in the early months of 2026 to allow taxpayers time to get set up. But this grace period will not last indefinitely, and penalties will be enforced once the system is fully bedded in.
6. Exemptions: Who Does Not Have to Comply?
Not all taxpayers in the 50,000 income bracket are required to comply from April 2026. HMRC has confirmed exemptions for:
- Taxpayers who cannot engage with digital tools due to age, disability, or location
- Practising members of certain religious societies whose beliefs are incompatible with using electronic communications
- Taxpayers whose businesses are subject to insolvency proceedings
Exemptions must be applied for through HMRC. If you believe you may qualify, speak to your accountant before April 2026 deadlines pass.
7. What to Do Right Now
If you are affected by MTD for ITSA from April 2026, here are the steps to take:
- Confirm whether you meet the 50,000 income threshold for the 2024/25 tax year
- Choose and set up HMRC-compatible software if you have not already done so
- Ensure your records from 6 April 2026 onwards are captured digitally, not in a spreadsheet or paper ledger
- Submit your Q1 update covering 6 April to 5 July 2026 by 5 August 2026
- Speak to your accountant if you are unsure whether you are in scope or how to get set up
If you are already using accounting software and working with an accountant, the practical changes may be minimal. The main shift is the addition of four quarterly updates per year rather than one annual return.
8. Why This Matters for Founders with Property Income
A significant number of UK tech founders and directors also receive income from residential property. If your combined business and rental income exceeds 50,000, MTD for ITSA applies to all of it, not just the property side.
This catches some founders by surprise. A director who pays themselves a modest salary from their company but also receives rental income above 50,000 may be in scope for MTD for ITSA even if their personal trade income is low.
It is worth reviewing your total income position carefully if you have multiple sources.
Final Thoughts
MTD for Income Tax is the most significant change to personal tax reporting in a generation. For those in scope from April 2026, the deadline has already arrived.
The good news is that for businesses with decent accounting records and the right software, the practical burden is manageable. Four quarterly updates a year is not a dramatic increase in workload if your books are already in good order.
The risk is for those who have been managing their tax affairs manually or with minimal accounting support. For them, the transition to digital reporting requires immediate action.
Do not wait for HMRC to prompt you. By the time they do, you may already have penalty points on your account.
Need Help Getting Set Up for MTD?
Book a free 15-minute consultation with our UK tax specialists at SustainEdge Global.
We will confirm whether you are in scope, help you choose the right software, and make sure your quarterly submissions are accurate and on time.
Book your free consultation today: https://sustainedgeglobal.com/uk/contact-us/
