Making Tax Digital for Income Tax (MTD ITSA): what is live now, who is in scope, and what you actually have to do

MTD ITSA: what changed on 6 April 2026

On 6 April 2026, Making Tax Digital for Income Tax Self Assessment (MTD ITSA) became compulsory for UK sole traders and landlords with combined trading and property income above £50,000 in the 2024/25 tax year. The change replaces the annual paper or online SA100 with four quarterly digital submissions plus a final declaration.

This is the biggest single change to the UK Self Assessment system in twenty years. If you are above the threshold, you should already be using MTD-compatible software. If you are below it now but expect to grow, the next two phase-ins are coming faster than most people realise:

Who is in scope

MTD ITSA applies if you have combined trading and property income above the threshold. Two important words:

• 'Combined', sole trader profit and rental income are added together. A landlord with £30,000 in rent and a side business making £25,000 of profit is in scope at £55,000 combined.
• 'Income', this is gross turnover (before expenses), not net profit. A landlord with £55,000 in rent and £25,000 in mortgage interest and other costs is still in scope; the £55,000 gross is what counts.

Outside the scope (for now):

• Partnerships, separate timeline still being finalised by HMRC
• Limited companies, governed by Corporation Tax, not Self Assessment
• Employees whose only income is PAYE
• Sole traders and landlords below the threshold
• Trusts, certain protected categories

What you have to do, four quarterly updates plus one final declaration

The MTD ITSA cycle has five submission points per tax year. The first four are quarterly updates of income and expenses; the fifth is the final declaration that finalises the tax bill.

The quarterly submission deadlines

You can elect to align with calendar quarters (so the periods run 1 January to 31 March etc.), which slightly shifts the deadlines. Most software defaults to the tax-year quarters above.

The quarterly updates are cumulative year-to- date summaries, not standalone period totals. So Q2 includes everything from 6 April, not just July to October. This means a correction in Q1 automatically flows through.

The software requirement

MTD ITSA cannot be done through the gov.uk online tax return page. Submissions must come from MTD-compatible software via a direct digital link to HMRC. The current list (May 2026) of the most-used options:

The full and authoritative list lives at gov.uk MTD ITSA software finder. We can recommend specific options based on your business type.

How quarterly updates differ from the old annual return

The most common misconception is that quarterly updates are 'mini tax returns'. They are not. Differences:

• Updates do not calculate tax. They report income and expenses only. The tax bill is calculated in the final declaration, with all other income (PAYE, dividends, savings, capital gains) brought together at that point.
• Updates can be revised. If you spot an error in Q1, you fix it in Q2 (because the figures are cumulative). No formal amendment process for quarterly updates.
• Categorisation can be light. The categories in the quarterly update are simpler than the SA full return (turnover, expense headings, profit). The detailed categorisation happens in the final declaration.
• No payment is due at the quarterly stage. The existing 31 January / 31 July payment-on-account cycle continues unchanged.

The penalty regime, points-based, not pound-based

MTD ITSA uses HMRC's points-based late submission penalty system (the same one introduced for VAT in 2023):

• Each missed submission earns 1 point
• Points accumulate over a 24-month look-back window
• For quarterly submissions, hitting 4 points triggers a £200 penalty
• For annual final declarations, the threshold is 2 points, then a £200 penalty
• Every further missed submission after that costs another £200 until your record clears
• Points reset to zero after 24 months of full compliance

Late payment of tax (separate from late submission) attracts the same interest and 30-day / 6-month / 12-month surcharges as the existing Self Assessment regime. Filing on time and paying late, or paying on time and filing late, both attract one set of penalties but not the other.

The 12-step transition: what to do in your first MTD year

1. Confirm whether you are in scope for 2026/27 (combined income above £50,000 in 2024/25)
2. Choose MTD-compatible software, ideally before 5 April
3. Sign up for MTD ITSA through your agent or directly via gov.uk
4. Open separate business and personal bank accounts if you have not already
5. Connect your business bank account to your accounting software
6. Set up rules for recurring transactions (rent, utilities, software subscriptions)
7. Categorise the first few weeks of transactions carefully, the patterns repeat
8. Reconcile the bank monthly, do not let it drift
9. Submit Q1 by 7 August, even if the figures feel rough
10. Refine Q2 and Q3 as bookkeeping habits settle
11. Use the figures in Q4 (and projections) to plan year-end tax position by February
12. Submit final declaration and pay tax by 31 January

Common worries we are hearing from clients

• "I do not use a computer for my bookkeeping." You will need to start. Software cost is genuinely modest and most apps have phone-friendly interfaces. We help non-digital clients onboard slowly over the first quarter.
• "I have multiple properties and one trade." Most landlord-friendly software handles portfolios; you file one quarterly update covering both the trade and the property income. The final declaration adds in any other income (PAYE, dividends, etc.).
• "My income is borderline £50k, am I in?" If your 2024/25 combined income was £50,001 or more, yes. If it was below, you are out until the next phase-in (April 2027 at £30,000).
• "What about my accountant?" Most accountants are now agent-registered for MTD ITSA. We can submit on your behalf, and most clients still rely on us for the final declaration regardless of MTD. The change is in record-keeping and submission frequency, not in the value of professional advice.