Overview
Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) represents the biggest shake-up to UK personal tax reporting since Self-Assessment began in 1996-97. From 6 April 2026, sole traders, landlords and partnerships whose combined gross income from self-employment plus UK property exceeds £50,000 will need to:
- keep digital records using HMRC-compatible software;
- submit four quarterly updates during the tax year;
- send a final declaration that replaces the conventional annual Self Assessment return. (mtd.digital)
Thresholds reduce over time — to £30,000 in April 2027, and £20,000 in April 2028. (salarytax.uk)
Key compliance requirements
| Requirement | Applies from | Who's in scope |
|---|---|---|
| Digital records with compatible software | 6 April 2026 | Combined income > £50,000 from self-employment + property |
| Submission of quarterly updates | Same as above | Same |
| Final declaration replacing SA return | Same | Same |
| Penalty point-based system for late filing | Same | Same |
Examples of digital records include invoices, receipts, bank statements tied to business or property incomes. These must be kept in HMRC-recognised software. (mtd.digital)
What to do next — Action plan
- Assess your income streams: Add together your property income and self-employed income. If that exceeds £50,000 in 2024-25 or likely in 2025-26, you’re in scope.
- Choose software: Identify MTD-compatible software. Ensure it can support quarterly updates and final declarations.
- Shift record-keeping practices: Move from paper or ad hoc spreadsheets to digital, real-time systems.
- Plan for deadlines: Understand quarterly dates (for many self-employed, these may fall in July, October, January, April).
- Prepare with exemptions & deferrals: Some individuals may apply for exemption (e.g. serious mental health conditions) or deferral. Check HMRC guidance.
Practical example
Alice runs an online store (self-employment) and rents out a cottage. In the 2024-25 tax year, her self-employment income is £35,000 and gross property income £18,000, combined £53,000 — she is in scope from 6 April 2026.
She must now use software to keep digital records, send quarterly updates, file a final declaration. If she misses a quarterly update, she’ll accrue a penalty point under the new system.
If her combined income were £45,000, she’d be outside scope until April 2027 (when threshold drops to £30,000).
Tips to stay compliant
- Automate invoicing and expense tracking where possible.
- Keep separate bank accounts for self-employment/property to simplify categorization.
- Regularly back up digital records.
- Plan cash-flow for administrative costs (e.g., software subscription).
- Engage a tax professional early if you’re near thresholds or have complex income streams.
Impacts and benefits
| Benefit | Challenge |
|---|---|
| More timely tax reporting; earlier visibility of profits/losses | Upfront cost & learning curve for software, processes |
| Reduced risk of large late-filing fine; replaced by manageable penalty points | Possible cash-flow implications of quarterly payments or adjustments |
Final words
MTD ITSA is set, and for those over the £50,000 combined income threshold, there’s no opting out. The sooner you prepare, the smoother the transition. By adopting good systems now and understanding your obligations, you’ll avoid penalties and build a stronger financial hygiene for your business or rental portfolio.