What is Making Tax Digital for Income Tax (ITSA)?
Making Tax Digital (MTD) for Income Tax is a UK government initiative requiring individuals with self-employment income and/or property income over certain thresholds to keep digital records and send quarterly updates to HMRC using compatible software.(gov.uk)
Key dates & thresholds
- From 6 April 2026: Individuals with combined self-employment and property income (gross before expenses) above £50,000 must comply.(gov.uk)
- From 6 April 2027: Threshold drops to £30,000.(gov.uk)
- From 6 April 2028: Threshold lowers further to £20,000.(gov.uk)
What compliance involves
- Maintain digital records of income and expenses for eligible sources.
- Send quarterly updates to HMRC summarising those records. These are NOT full returns but summary data.(gov.uk)
- Continue to submit the full Self Assessment return by 31 January following the tax year.
- Use software compatible with MTD for Income Tax. It must be able to store data digitally, correct it, and connect securely to HMRC.(gov.uk)
Penalties and easing periods
- Penalties for missing quarterly updates will not be applied in the 2026–27 tax year, giving a grace period for compliance.(gov.uk)
- HMRC will notify eligible taxpayers based on their previous years’ qualifying income—so check your income history to see when you need to start.(gov.uk)
Actionable steps for stakeholders
- Self-employed individuals and landlords should assess whether their 2024–25 income exceeds £50,000. If so, begin preparing now.
- Agents/accountants/bookkeepers should make sure they have software clients recommend or use HMRC-recognised tools.
- Keep clean, organised records (invoices, receipts, rental contracts)—digital storage is essential.
- Plan for quarter-end submissions: create workflows to gather and update data weekly or monthly to avoid last-minute crunch.
- Attend HMRC webinars or use agent toolkits for guidance.(gov.uk)
Example scenario
Sarah is a landlord with gross rental income of £60,000 per year and minimal expenses. Beginning 6 April 2026, she must:
- Sign up for MTD for ITSA.
- Use software to store records of income and expenses.
- Submit quarterly summaries on income and expense totals.
- Still file a Self Assessment return by 31 January 2028 for tax year 2026/27.
If Sarah delays or fails to send quarterly summaries, in the first enforcement year she’ll likely avoid penalty but not indefinitely—compliance is now expected.
Why this matters
- Greater transparency: HMRC will have near real-time visibility into income and profitability, reducing errors and under-reporting.
- Time saving in the long term, though there is initial effort setting up software and processes.
- Those who are proactive avoid compliance risk and potential financial penalties later.
Stay ahead of the 2026 deadlines—invest in software, professional help if needed, and build good record-keeping routines now to avoid headaches later.