Making Tax Digital for Income Tax Self-Assessment (commonly abbreviated to MTD ITSA) changes how many sole traders and landlords file their tax. Instead of one annual Self-Assessment return, eligible individuals will keep digital records and send quarterly updates and final declaration to HMRC using approved software. The phased rollout begins on April 6, 2026, and introduces a predictable schedule of quarterly submissions, along with a final year-end declaration.
This guide explains what qualifies as income, who is eligible to join, the required software, how quarterly deadlines work, what to do now, and how to avoid the new points-based penalties. It’s written for UK taxpayers, sole traders, and landlords who want practical, step-by-step guidance to get MTD-ready.
Key Highlights & Summary
- MTD ITSA replaces annual filing with quarterly updates + a final declaration, submitted from approved software.
- Thresholds: in scope sole traders and landlords earning £50k (2026), then £30k (2027) and £20k+ from 2028.
- Quarterly deadlines are fixed: August 7, November 7, February 7, and May 7 (see tables below).
- Exemptions: digital exclusion (e.g., age/health/connectivity) and low qualifying income. Apply directly to HMRC.
- Penalties use a points-based system for late submissions; fines apply once you hit the threshold.
- Use HMRC’s Software Finder to pick compatible tools.
What is MTD ITSA and how does it work?
MTD ITSA is a change in how rental and business income are recorded and reported. For eligible sole traders and landlords, it replaces the traditional annual-only Self-Assessment model with digital record-keeping and regular updates to HMRC. The purpose is to give taxpayers a clearer, real-time view of their tax position and reduce errors caused by reconstructing transactions months after they happened.
Under MTD ITSA, you’ll:
- keep digital records of your business and property income and expenses using HMRC-recognised software,
- send quarterly summary updates that show cumulative totals for the tax year,
- Submit a final declaration at year-end, which effectively replaces the Self-Assessment return for those obligations.
HMRC is committed to supporting you through this transition. The practical difference is that instead of one busy push at the end of January, you’ll report throughout the year and be able to see an ongoing estimate of tax due. This helps with budgeting for payments, reduces surprises, and makes record-keeping more straightforward when done in near-real time.
Does MTD for Income Tax Apply to Me?
MTD ITSA applies to individuals (not companies or trusts yet) who are either:
- sole traders with self-employment income, and/or
- Landlords with property income (UK or overseas), and whose qualifying income meets the thresholds set by the staged rollout.
What Counts as Qualifying Income for MTD ITSA and What Doesn’t?
Qualifying income is the total gross income (before expenses) from all your self-employment trades and property businesses in a tax year. It does not include dividends, savings interest, pensions or capital gains, although those other income streams still matter for your overall tax calculation. If you have multiple sole trades or lots of properties, you must add up the gross receipts from every trade and property business to decide whether you cross the threshold. For joint ownership, only your personal share of the income counts toward your qualifying income.
If your combined qualifying income reaches or exceeds the threshold for a given start year, you must comply from the relevant date, even if, after expenses, you’ve made a loss or minimal profit. That’s why checking gross receipts is the first step in planning for MTD ITSA.
When Does MTD for Income Tax Start and What Are the Key Deadlines?
The rollout is phased so taxpayers can prepare in stages. The government has set the following timetable based on gross qualifying income measured in a tax year:
From April 6 2026: taxpayers with gross qualifying income of £50,000 or more.
From April 6 2027: taxpayers with gross qualifying income of £30,000 to £49,999.
From April 6 2028, the government has set out plans to include gross qualifying income of £20,000 or more.
How to check your start year
Look at your qualifying income for the relevant tax year (current year minus 2): for example, qualifying income in 2024–25 determines whether you start in April 2026 (if it’s £ 50,000 or more).
If your qualifying income is close to a threshold, plan early; voluntary early adoption is allowed and can reduce setup pressure.
Tip: If you are near a threshold, calculate both single-year and multi-year averages to understand whether expected growth or a one-off spike will mean you must start earlier than anticipated. Starting earlier voluntarily gives you breathing space to test software, enable bank feeds, and fix bookkeeping processes.
MTD Quarterly Updates: What Do I Need to Send to HMRC Each Quarter?
A central feature of MTD ITSA is quarterly updates. Instead of a single annual submission, you send four cumulative updates across the tax year, followed by a final declaration. HMRC allows two reporting period options:
- Standard (aligned to the tax year) or
- Calendar (end-of-month quarters).
Regardless of your choice, the key deadlines remain consistent.
Quarterly updates Deadlines: August 7, November 7, February 7 and May 7 (you must submit each quarter’s update by the 7th day of the second month after the period end).
| Quarters | Cumulative Standard Period | Cumulative Calendar Period | Deadline |
|---|---|---|---|
| Q1 | 6 April – 5 July | 1 April – 30 June | 7 August |
| Q2 | 6 April – 5 October | 1 April – 30 September | 7 November |
| Q3 | 6 April – 5 January | 1 April – 31 December | 7 February |
| Q4 | 6 April – 5 April | 1 April – 31 March | 7 May |
Some practical notes:
- You must choose your update period (Standard vs Calendar) before your first submission in the tax year; most software enforces that you can only switch at the start of a new tax year.
- Each quarterly update is cumulative. That means your Q2 update includes totals from the start of the tax year through the end of Q2, not just the transactions within Q2. If you find a mistake in an earlier quarter, you can correct it in a later update before the final declaration.
- You’re allowed to submit updates more frequently than quarterly if you prefer (weekly/monthly), and some software will let you submit earlier once the figures for the period are complete.
What do you send each quarter?
The quarterly update is a straightforward summary of category totals: income, expenses, and disallowable items as required by your software. You do not need to do complex year-end adjustments in each update; those are captured in the final declaration. Instead, think of quarterly submissions as checkpoints that record the cumulative position. This simple process ensures that you stay on top of your tax obligations throughout the year.
Typical data elements captured in a quarterly update:
- total gross income (per trade or property business) to date in the tax year,
- total allowable expenses to date (mortgage interest, repairs, professional fees, insurance, etc, for property; materials, subsistence, equipment for trades),
- Category breakdowns that help HMRC and your software estimate tax and National Insurance liabilities,
- Reconciled bank totals if you use bank feeds or integrations.
Good practice:
Make sure you tag income and expenses by source (each sole trade and each property business). Many landlords and multi-trade taxpayers find this helpful for reporting and profitability tracking.
Attach or keep digitised supporting documents (invoices, receipts) so you can evidence amounts in case of an inspection. However, HMRC doesn’t force you to upload every file, but you must retain them for the statutory period. Most software allows you to scan receipts directly into the system.
How Does the Final Declaration Work Under MTD for Income Tax?
After the fourth quarterly update, you must submit a Final Declaration (sometimes called the final submission or final declaration of the tax year) through your MTD software. This reconciles the year’s transactions, applies any year-end adjustments (such as capital allowances, private use adjustments, accruals, and reliefs), and effectively replaces the Self-Assessment tax return.
Key points:
- The final declaration is when you lock down the year’s taxable income figures for HMRC to calculate tax due.
- Make sure you review each quarterly update before finalising, because the final declaration should include any adjustments for omitted income or late expenses.
- Even after the final declaration, HMRC may raise queries or ask for clarifications, so keep supporting records ready for inspection (we recommend retaining records for at least five years after the submission deadline).
Note: The deadline and workflow for paying any tax due will follow the familiar timetable in most software (for example, software commonly integrates with the January payment process or offers a taxation summary showing liabilities and payment dates).
How Do I Register for MTD for Income Tax and Complete HMRC Enrolment?
To use MTD ITSA, you must sign up for the service on GOV.UK and link your chosen software to HMRC. Signing up involves verifying your identity via Government Gateway credentials, confirming your tax obligations, and authorising your software to communicate with HMRC on your behalf. If you already use MTD for VAT, you still need to enrol separately for Income Tax, as they are distinct services.
How to sign up:
- Check if you must join (add up qualifying income).
- Register/enrol for MTD for Income Tax via GOV.UK (you will need your UTR and National Insurance number).
- Choose MTD-compatible software and connect it to HMRC using the software’s connection flow (many providers include step-by-step guides).
- Agents and accountants: if your accountant files on your behalf, they’ll need agent authorisation to submit updates through their software. Authorise your agent in the usual way via HMRC online services and ensure they are set up to file the quarterly updates for you.
Which Software Do I Need for MTD for Income Tax?
You cannot fulfil MTD ITSA obligations by typing totals manually into your HMRC online account, so the submissions must come from HMRC-recognised software via APIs. HMRC’s Software Finder lists compatible products and explains the features required (record keeping, bank feeds, API submission capability, multi-income support and bridging for spreadsheets).
Options for different users:
- Standalone MTD software — designed specifically for income tax reporting and MTD workflow; often simplest for landlords and sole traders.
- Accounting packages with MTD support — many mainstream packages (cloud accounting tools) now provide MTD modules and bank integration.
- Bridging software — if you prefer spreadsheets, bridging software connects your spreadsheet to HMRC to submit the required data. This is a valid route for small taxpayers who want to retain a spreadsheet workflow.
What to look for:
- automatic bank feeds and transaction matching;
- multi-business / multi-property handling and tagging;
- the ability to attach or store supporting documents;
- end-of-period workflows to prepare the Final Declaration;
- friendly support and clear guidance for upload frequency and deadlines.
Practical tip: trial software before committing. Many providers offer free trials or free tiers for small users. For landlords and sole traders who want low-cost entry, there are free/basic plans; paid tiers typically cost between £10 and £30/month, depending on features.
Who Can Claim MTD Exemptions and What Is Digital Exclusion?
Not everyone must comply. HMRC allows exemptions where MTD is “not reasonably practicable” for the individual.
Common reasons accepted include:
- severe physical or mental health issues that prevent digital filing;
- lack of internet connectivity due to remote location;
- strong religious beliefs that prevent the use of electronic systems;
- qualifying income below the relevant threshold for the start year.
If you think you qualify for an exemption, you must apply directly to HMRC with supporting evidence (you’ll need your UTR and National Insurance number). Exemptions are considered case-by-case; they are not automatic, and you should continue to keep appropriate records for inspection even if an exemption is granted.
In practice, most taxpayers will not qualify for permanent exemptions. HMRC guidance and software providers help, and some taxpayers may qualify for temporary exceptions while they address accessibility issues. Always check the latest HMRC guidance for the specific documents required when applying for a practical or medical exemption.
How Much Will MTD Compliance Cost for Self-Employed Individuals and Landlords?
There are several cost elements to consider:
- Software costs: many providers offer free plans for single or small users; premium features (multi-property, multi-user, bookkeeping automation) typically cost £10–£30/month.
- Professional fees: accountants may charge an implementation or onboarding fee to set up MTD workflows and recurring costs for quarterly review and submissions. Expect either hourly rates or fixed annual packages, depending on complexity.
- Time cost: staff or owner time to digitise historic records, scan invoices, and learn new software.
- Opportunity cost/transition costs: initial effort to map your chart of accounts and tag expenses by source can feel heavy the first time, but pays off in faster reporting and better real-time insight subsequently.
HMRC has estimated average transition and ongoing admin costs in the past, but actual expense depends on your portfolio size and whether you use an accountant. For many small taxpayers, software automation and bank feed reconciliation reduce time and error costs in the medium term.
What Are the MTD Penalties?
There are two kinds of penalties under MTD: Late submission and late payment. HMRC operates a points-based penalty system for late submissions under the new penalty regime. Instead of automatic, immediate fines for every late submission, taxpayers receive penalty points for missed obligations; when a points threshold is reached, a financial penalty is applied. Points expire after a sustained compliance period, giving taxpayers an opportunity to reset their record by filing on time consistently.
How Do Late Submission Penalties Work Under the Points System?
Every legal submission under MTD has a deadline here, quarterly updates and the final declaration. If you miss a deadline, you earn one penalty point.
Once you reach a certain number of points, HMRC issues a £200 fine, and any further missed deadline triggers another £200 fine automatically.
The threshold depends on how frequently you are required to submit:
What About Late Payment Penalties?
Under MTD, penalties for late submissions and late payments are separate. Interest on unpaid tax starts immediately after the due date, while penalties increase in stages:
First 30 days: No penalty for the first 15 days. From day 16 to 30, a 2% penalty applies if no Time-to-Pay (TTP) arrangement is in place. Setting up a TTP during this period stops penalties.
After 30 days: A second charge applies, and interest continues to accrue daily until the tax is paid. A TTP plan halts penalties from the approval date if payments are made on schedule.
How to avoid penalties:
- set reminders and calendar alerts for the four quarterly deadlines;
- ensure software bank feeds are working and reconcile regularly;
- Use bridging software temporarily if your primary software is misbehaving.
- authorise your agent/accountant early if they’ll file for you;
- If you genuinely cannot file on time for an exceptional reason, contact HMRC. They will consider reasonable excuses.
MTD for Income Tax: What Are the Differences Between Sole Traders and Landlords?
From a rule’s perspective, sole traders and landlords follow the same MTD thresholds, software requirements and quarterly deadlines. The practical difference is how you treat income and expenses:
| Sole traders | Landlords |
|---|---|
| You’ll track sales, cost of goods sold, business expenses, and allowable deductions for your trade. Separating personal and business transactions is helpful. | You’ll track rental income, deposits, service charges, mortgage interest relief (where applicable), repairs, letting agent fees, and capital items. |
If you have both self-employment and property income, you must maintain separate records for each source. Many software packages handle multiple income types (tagging transactions to a specific trade or property), which makes quarterly submissions simpler. Remember: qualifying income sums the gross receipts from each business and property to determine your start year. That’s why you do not mix net profit figures when deciding whether you must join MTD.
What is the Practical step-by-step checklist?
- Check qualification: total your gross income from all trades and property for the relevant tax year to find your start year.
- Choose software: use HMRC’s Software Finder to shortlist MTD-compatible tools and trial them.
- Sign up/enrol: register for MTD for Income Tax on GOV.UK, link your software and authorise any agent who will file for you.
- Digitise historic records: import bank statements, scan receipts, and map expense categories. Aim to be up to date before your first quarter ends.
- Pick your update period (Standard vs Calendar) before your first update of the tax year, most software enforces no mid-year switching.
- Run a dry run: submit a test update (many software providers support trial runs) so you understand the mechanics and confirm bank feeds and category mapping.
- Set reminders & automation: configure software reminders, automatic reconciliation, and calendar notifications for the August 7 / November 7 / February 7 / May 7 deadlines.
- Prepare the final declaration: after Q4 check for adjustments, capital items and any reliefs before you send the final declaration.
What Digital Records Do I Need to Keep for MTD and What Counts as Proof?
Under MTD, you must keep complete digital records that support the figures you submit. HMRC requires that these records be kept for at least five years after the submission deadline for the tax year, though software vendors and advisors often recommend keeping them longer for peace of mind.
What to retain:
- digital copies of invoices, receipts, bank statements and contracts,
- evidence of exchange rates for overseas income converted into GBP,
- records of capital expenditure and disposals that may affect future capital gains.
Practical advice:
Use software that attaches receipts to transactions, labels or tags transactions by trade/property, and backs up data where the software allows local exports or reports. Consider exporting a yearly archive as a PDF or spreadsheet as a secondary, offline record.
MTD for Income Tax FAQs
Can I still use spreadsheets?
Yes, but only if they are connected to HMRC via MTD bridging software that meets MTD requirements. Direct manual typing of figures into your HMRC online account is not allowed for MTD submissions.
Do I need to sign up if I’m already on MTD for VAT?
Yes. MTD for VAT is a separate service. You must enrol separately for MTD for Income Tax.
What happens if my income dips below the threshold after I’ve joined?
Once you’re within the MTD regime, you’ll continue to comply with that obligation; thresholds are measured for start dates. If your income permanently falls below the threshold, you should check HMRC guidance on de-registration or discuss options with your adviser. HMRC published detailed guidance on when to sign up and when obligations apply.
Can an accountant submit for me?
Yes, agents can be authorised to file quarterly updates using agent-enabled MTD software. UK Property Accountants provides full MTD service.
Are there transitional rules for the first year?
The first year operates under the staged deadlines and cumulative updates; HMRC has published readiness pages and timelines to help early adopters and volunteers' transition smoothly. Some voluntary testers had earlier deadlines (e.g., 5th of the month), but these will align ahead of the April 6, 2026, mandatory start date.
Final Words
The practical reality is that MTD ITSA is manageable if you prepare early. Start by confirming if your gross qualifying income meets a threshold for 2026, 2027 or 2028. Choose software with bank feeds and multi-income support, and enrol on HMRC’s website, and run a pilot quarter to ensure the mechanics of quarterly updates and final declaration work for you. Use your accountant for the initial setup if that reduces time and anxiety. We offer fixed-fee MTD onboarding packages.
Adopt good digital record-keeping habits: tag transactions, scan receipts promptly, reconcile bank feeds weekly, and use the quarterly updates as an opportunity to monitor and plan tax cash flow rather than a compliance chore. From a business perspective, the shift provides real-time insight into profitability and tax exposure that was previously only visible once a year. Use this visibility to manage payments, investments, and growth more confidently.