Making Tax Digital for Income Tax Self Assessment (MTD ITSA) has applied to sole traders and landlords with gross qualifying income above £50,000 since 6 April 2026. On 6 April 2027, the limit drops to £30,000, and it falls again to £20,000 in April 2028. Anyone in scope must keep digital records, send four quarterly updates a year through HMRC-compatible software, and complete a final declaration after the tax year ends. Some people are exempt, and others can join early. Checking your income, choosing software and building a regular bookkeeping routine now will make the change far less stressful.
- From 6 April 2027, anyone with gross self-employment and property income above £30,000 in 2025/26 must follow MTD ITSA.
- The limit is measured on turnover before expenses, and income from self-employment and property is added together.
- Quarterly updates are due on 7 August, 7 November, 7 February and 7 May, with a final declaration by 31 January.
- No penalty points apply to late quarterly updates in 2026/27, but a points-based system applies in later years.
- Exemptions exist for digital exclusion, religious beliefs, and certain roles, and HMRC must agree them rather than you assuming them.
For many years, self-employed people and landlords sent HMRC one yearly summary of their finances. That meant gathering receipts, calculating a profit figure after the tax year closed, and filing before the January deadline. Making Tax Digital for Income Tax Self Assessment replaces that single event with a steady flow of digital records and regular reports.
The first group began in April 2026, and a much larger group follows on 6 April 2027. If your income from trading or letting property falls between £30,000 and £50,000, this date matters. It is not too early to start, and the winter months give you time to settle into the new routine before any deadline arrives.
This guide explains what MTD ITSA is, who it affects and when, what you need to do, how penalties work, who is exempt, and the practical steps you can take to prepare.
What Is MTD ITSA?
MTD ITSA is the part of the government’s Making Tax Digital programme that applies to income tax. It requires sole traders and landlords to keep business records digitally and send HMRC regular summaries of income and expenses using software that connects directly to HMRC’s systems. HMRC does not provide this software itself, so each taxpayer chooses a compatible product.
The aim is a tax system with fewer mistakes, quicker information for both sides, and fewer unpleasant surprises when the final bill arrives. For taxpayers, the main change is that bookkeeping becomes an ongoing task rather than something done once a year.
When Does MTD ITSA Become Mandatory?
The rules are being introduced in stages, based on qualifying income:
- 6 April 2026: gross income above £50,000
- 6 April 2027: gross income above £30,000, based on your 2025/26 tax return
- 6 April 2028: gross income above £20,000, based on your 2026/27 tax return
HMRC looks at the figures on your Self Assessment return to decide whether you are in scope. If your income is below the threshold in a given phase, you don’t need to join at that point, although a later phase may catch you.
How to Work Out Your Qualifying Income
Qualifying income means gross income from self-employment and property, added together, before any costs are deducted. Imagine a plumber who earned £28,000 from trading in 2025/26 and also received £14,000 in rent from a flat. The combined total is £42,000, which is above £30,000, so this person must join from April 2027, even if their profit after expenses is much lower.
Income from employment taxed under PAYE, pensions and dividends is not included in the calculation. For jointly owned property, only your own share of the rent counts towards your total.
What Are the Key Requirements for MTD ITSA?
People in scope need to meet four main obligations.
Keep Digital Records
Record every sale, payment received, and business expense digitally. For landlords, that means rent and property costs; for the self-employed, it means invoices, receipts, and other trading figures. You can still use spreadsheets, but only if bridging software links them to HMRC. Copying figures across by hand does not meet the digital link rules.
Send Quarterly Updates
Four times a year, your software sends HMRC a summary of your income and expenses. Each update shows cumulative figures for the tax year so far, so the totals build up gradually rather than restarting each quarter.
Complete a Final Declaration
After the year ends, you confirm your figures through your software, add any adjustments and other income, and settle your tax. This replaces the traditional annual return and is due by 31 January after the tax year ends.
Follow the Points-Based Penalty System
Late submissions earn penalty points, and a financial penalty applies once you reach the limit. The details are covered below.
Key Deadlines to Know
Quarterly updates fall due on the same four dates every year: 7 August, 7 November, 7 February and 7 May. Standard quarters begin on 6 April, but many software products also allow calendar quarters ending on 30 June, 30 September, 31 December and 31 March. Whichever you use, the deadlines stay the same.
If you join in April 2027, your timetable looks like this:
- First update: 7 August 2027
- Second update: 7 November 2027
- Third update: 7 February 2028
- Fourth update: 7 May 2028
- Final declaration: 31 January 2029
Anyone who joined in April 2026 still has updates due on 7 November 2026, 7 February 2027 and 7 May 2027, with a final declaration due by 31 January 2028.
How Do MTD ITSA Penalties Work?
HMRC has confirmed a softer start for the first year. During 2026/27, late quarterly updates will not earn penalty points, although you must still submit every update. From the following tax year, each missed quarterly update or late final declaration adds one point, and reaching four points triggers a £200 penalty, with further £200 penalties for later missed deadlines.
Late payment of tax is dealt with separately, with charges and interest that grow the longer a bill stays unpaid. People joining in April 2027 start in the 2027/28 tax year, so the points system applies from the first quarter.
Are There Any Exemptions From MTD ITSA?
Yes, but you should never assume an exemption. Some apply automatically, while others need HMRC’s agreement.
Income Below the Threshold
If your gross income from self-employment and property is below the limit for the relevant phase, you don’t have to join in that phase. You continue to file a normal Self Assessment return.
Digital Exclusion
If age, disability, location or another circumstance makes it unreasonable for you to use digital tools, you can ask HMRC for an exemption. HMRC reviews each case individually.
No National Insurance Number
People who do not have a National Insurance number by 31 January before the tax year in question are exempt automatically, and no application is needed.
Religious Beliefs
Members of certain religious societies or orders whose beliefs conflict with electronic record-keeping and communication can be exempt, where the business is run only by practising members.
Other Groups
Further exemptions cover trustees, executors and administrators, personal representatives of deceased people, non-resident companies and Lloyd’s members.
Can You Join Voluntarily, and Can You Leave?
If you are not required to use MTD ITSA, you can still sign up voluntarily. Many people with income just under a threshold do this to practise before the rules apply to them. Once you are in, you must meet all requirements, including the quarterly deadlines.
People who were brought in by the income thresholds can leave after their income has stayed below the limit for three consecutive tax years. If you’re considering leaving, or are unsure about your position, check HMRC’s current guidance first.
How Can You Prepare for MTD ITSA?
A simple plan, started now, spreads the workload and avoids last-minute stress:
- Check your income: Add up your 2025/26 gross self-employment and property income and compare it with the £30,000 limit.
- Choose compatible software: Look for a product on HMRC’s approved list that suits your income type. QuickBooks, Xero and FreeAgent are popular options, but always confirm approval before you commit.
- Start digital records early: Begin logging income and expenses now so your figures are clean before April 2027.
- Separate business and personal money: A dedicated bank account, connected to your software through a bank feed, makes tracking much easier.
- Diarise the deadlines: Set reminders a week before each quarterly date.
- Understand the penalties: Knowing how points build up helps you treat deadlines seriously from the start.
- Keep up with HMRC guidance: More detail is expected before April 2027, so check official updates from time to time.
- Ask for professional help: An accountant can confirm whether you are in scope, set up your software and review your first submissions.
Final Thoughts
MTD ITSA is no longer a distant plan. It is already part of the tax system for people earning over £50,000, and the £30,000 threshold arrives on 6 April 2027. Those who prepare early will find the move far easier than those who wait until the first deadline is close.
Reliable digital records, suitable software and a clear view of the calendar are the foundations of compliance. If you are unsure about your status or the steps you need to take, talking to a tax professional can save time and prevent costly mistakes.
Cartwheel International helps sole traders and landlords across the UK with MTD ITSA setup, quarterly submissions, Self Assessment and bookkeeping. Book a free consultation to find out where you stand before April 2027.
Frequently Asked Questions
No. Quarterly updates are progress reports on your income and expenses, not payment deadlines. Your tax is settled after the final declaration, and late payment is handled separately from late submissions, with its own charges and interest. The updates simply give you and HMRC an earlier picture of what you are likely to owe.
HMRC uses the figures on your Self Assessment return to decide whether you are in scope, so your 2025/26 return is what counts for April 2027. Don’t wait to be told, though. Check your gross self-employment and property income against the £30,000 limit now, so you have time to choose software and get your records in order.
No. They are separate parts of the Making Tax Digital programme. MTD for VAT covers VAT returns for VAT-registered businesses, while MTD ITSA covers income tax for sole traders and landlords. You could be affected by both, and each has its own software, deadlines and requirements.
Yes. Many sole traders and landlords hand over the setup and ongoing work. An accountant can confirm whether you are in scope, set up your software, keep your digital records in order and review each quarterly update before it goes to HMRC. This is especially useful if you have both trading and rental income, or if you are unsure about your first few submissions.
For construction contractors, a detailed comparison of Standard VAT Accounting, the Flat Rate Scheme, and Cash Accounting may be especially important because VAT treatment can differ substantially depending on the balance between labour, materials, and Domestic Reverse Charge supplies.
