What is “Making Tax Digital for Income Tax” (MTD ITSA)?
Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) is a modernisation initiative by HMRC. Under MTD ITSA, landlords and sole traders in the UK must keep digital records and submit quarterly updates to HMRC via compatible software. (assets.publishing.service.gov.uk)
Who’s affected and when
| Qualifying income bracket | Starting date |
|---|---|
| Gross income over £50,000 (from self-employment and/or property) | From 6 April 2026 (assets.publishing.service.gov.uk) |
| £30,000–£50,000 | From 6 April 2027 (assets.publishing.service.gov.uk) |
| £20,000–£30,000 | From 6 April 2028 (assets.publishing.service.gov.uk) |
These thresholds include gross income before any expenses or allowances. Using your most recent Self Assessment makes determining this simpler. (gov.uk)
Actionable steps to prepare
- Adopt-and test out MTD-compatible software now. Many leading providers offer tools tailored for landlords and sole traders. Ensure software tracks gross income, expenses, and supports quarterly updates.
- Keep digital records throughout the year—not just when preparing returns. Quarterly updates mean earlier visibility of income patterns and tax liabilities.
- HMRC will send letters to those identified to join from 6 April 2026. Use that notice and historic return data to project your compliance obligations. (assets.publishing.service.gov.uk)
- Review if an exemption or deferral applies (e.g. partnerships are excluded from MTD for ITSA). (assets.publishing.service.gov.uk)
Compliance risks & benefits
Risks if you don’t comply:
- Penalties or “penalty points” for late or missing quarterly updates (once penalty point thresholds are hit) (assets.publishing.service.gov.uk).
- Audit risk is higher if you maintain poor records or miss update deadlines.
Possible benefits:
- Smoother cash flow management by identifying tax liabilities quarterly rather than chasing retrospective surprises.
- Better insights into business profitability and expense management throughout the year.
- Reduced year-end stress when submitting Self Assessment returns.
Example scenario
Jane is a landlord:
- Gross rental income: £55,000/year; expenses: £20,000.
- As gross income exceeds £50,000, Jane must start MTD ITSA from 6 April 2026.
- She buys a software package, tracks monthly expenses digitally, submits quarterly summaries.
- She misses one update: gets a penalty point. But since this is her first miss, no financial penalty yet—just warning.
Paul is a sole trader with gross income of £40,000:
- No requirement yet for MTD ITSA since threshold is £50,000.
- But from 6 April 2027, he will need to comply since his gross income lies in £30,000-£50,000 band.
- If Paul begins tracking digital records now, he’ll save time and avoid scrambling later.
Final thoughts
If you're a landlord or sole trader with qualifying income over £50,000, the countdown is on: from 6 April 2026 you’ll need to switch to digital record-keeping and quarterly updates. Those in lower income brackets will follow over the next two years. Begin early with software, organise your records and get ahead of the compliance curve.