Making Tax Digital for Income Tax: what changes and when
Making Tax Digital for Income Tax replaces parts of the traditional Self Assessment cycle for sole traders and landlords. From April 2026, those with qualifying gross income over £50,000 must keep digital records, send four quarterly updates, and submit an annual return through compatible software. This guide covers who is in scope, key dates, exemptions, and what lower-income traders can do now.
Checked against GOV.UK guidance · last reviewed
What Making Tax Digital for Income Tax is
Making Tax Digital for Income Tax (MTD for ITSA) is HMRC's new way for sole traders and landlords to report self-employment and property income within Self Assessment. It does not replace Self Assessment entirely. Taxpayers still file one annual return and pay tax by the usual January deadline, but the path to that return changes for those within scope.
The regime adds three obligations on top of the familiar annual cycle: keeping digital records of trading and property income and expenses, sending quarterly summary updates to HMRC during the tax year, and submitting the annual return through compatible commercial software rather than the standalone HMRC online form.
MTD for ITSA applies only to individuals already registered for Self Assessment who receive income from self-employment as a sole trader, from UK property, or from both. Partnerships, companies, and employees taxed wholly through PAYE sit outside this first phase.
Who is mandated from April 2026
Mandation is driven by qualifying income — the total turnover from self-employment and property before expenses, taken from the relevant prior-year Self Assessment return. It is gross income, not profit, that determines whether the threshold is crossed.
HMRC is introducing MTD for ITSA in stages:
| Prior tax return used | Qualifying income threshold | Start date |
|---|---|---|
| 2024 to 2025 | more than £50,000 | 6 April 2026 |
| 2025 to 2026 | more than £30,000 | 6 April 2027 |
| 2026 to 2027 | more than £20,000 | 6 April 2028 |
For the first wave, HMRC reviews the 2024 to 2025 return (due by 31 January 2026). Where qualifying income exceeded £50,000, the taxpayer must use MTD for ITSA from 6 April 2026. HMRC writes to confirm mandation ahead of the start date.
Once mandated, a taxpayer remains in MTD for ITSA until qualifying income stays below the relevant threshold for three consecutive tax years. Voluntary sign-up is available before mandation bites but brings its own penalty rules for volunteers.
Digital record-keeping
A digital record under MTD for ITSA is an income or expense entry created and stored in compatible software. Each record needs an amount, the date income was received or the expense arose, and a category matching the Self Assessment income and expense headings.
Digital records are required only for self-employment and property businesses. Other income — employment, dividends, savings, pensions — does not need digital record-keeping, though it must still be reported on the annual return through the same software.
Taxpayers must continue keeping supporting documents as they do now. MTD adds a digital layer; it does not remove the evidence behind the figures.
Software falls into two broad types. All-in-one products create records directly and handle submissions. Bridging software connects to existing records, such as spreadsheets, and transmits totals to HMRC. Where more than one product is used, records must be digitally linked without manual re-keying between systems.
Record-keeping starts from 6 April 2026 for those using standard update periods aligned to the tax year (6 April to 5 April). Traders whose accounting period runs 1 April to 31 March may use calendar update periods and begin digital records from 1 April 2026.
Quarterly updates and deadlines
Quarterly updates are cumulative summaries of self-employment and property income and expenses, not tax returns. Software totals the digital records from the start of the tax year to the end of each update period. HMRC receives category totals only — not individual receipts or invoices.
Four updates are due each tax year. Under standard update periods, the periods and deadlines are:
| Update period | Deadline |
|---|---|
| 6 April to 5 July | 7 August |
| 6 April to 5 October | 7 November |
| 6 April to 5 January | 7 February |
| 6 April to 5 April | 7 May (following tax year) |
Calendar update periods (1 April to 31 March) use different period end dates but the same submission deadlines. The choice of period type is made in software before the first update is sent and cannot be changed mid-year.
Updates may be sent any time after the period ends and up to the deadline. After each update, HMRC provides an estimated tax position based on the figures submitted plus information it already holds, such as PAYE employment income.
Corrections to digital records can be made within a later update without resubmitting earlier ones, because each update replaces the year-to-date position.
For the 2026 to 2027 tax year, HMRC will not apply penalty points for late quarterly updates. All four updates must still be sent before the annual return can be submitted. From 2027 to 2028 onwards, late updates attract penalty points; reaching four points triggers a £200 penalty for mandated users.
The annual return and final declaration
The annual tax return remains the mechanism for settling tax for the year. Under MTD for ITSA, it is prepared and filed through compatible software rather than the main HMRC Self Assessment online service.
The software presents year-to-date self-employment and property totals drawn from the quarterly updates. Before submission, the taxpayer reviews these figures and may need to make adjustments — for capital allowances, averaging relief, or joint property expense claims not included in updates.
Other income sources and reliefs are added in the software at this stage. HMRC pre-populates some information it already holds, but savings, dividends, and capital gains must be checked and completed where relevant.
The payment deadline is unchanged. Tax due for the year remains payable by 31 January after the tax year end. For someone in their first MTD year (2026 to 2027), that means 31 January 2028. This end-of-year step replaces entering all figures on the HMRC website, but the legal outcome — a Self Assessment return and a tax liability — is the same.
Compatible software
HMRC does not provide MTD for ITSA software and does not recommend any particular product or provider. Taxpayers must choose commercial software that has passed HMRC's recognition process and supports the income sources, accounting period, and submission types they need.
The official software finder on GOV.UK lists recognised products after a short questionnaire. Products range from free options for simple affairs to full accounting platforms. Bridging products exist for those who prefer spreadsheets.
Software must create or connect to digital records, send quarterly updates, and submit the annual return including all non-MTD income sources. The choice of software should be settled before sign-up.
Exemptions and deferrals
Not every sole trader or landlord within the income threshold must join in April 2026. HMRC grants automatic exemptions in defined cases and allows applications where digital exclusion or specific tax circumstances apply.
Automatic exemptions include qualifying income of £20,000 or less, partnerships (for now — a future timeline will be announced), certain trust and company returns filed on behalf of entities, and taxpayers without a National Insurance number at the start of the tax year. Role-based exemptions cover personal representatives of deceased estates and similar situations.
Temporary automatic exemptions lasting until at least April 2027 apply where the 2024 to 2025 return included specific supplementary pages or claims — averaging relief, qualifying care relief, trust income (SA107), or residence matters (SA109).
Digitally excluded taxpayers may apply for an exemption where age, disability, religious belief, or lack of internet access makes compatible software unreasonable. HMRC does not grant exemption solely for preferring paper filing or being unfamiliar with software.
Exempt taxpayers continue filing Self Assessment returns through the existing channels. Exemption does not remove the obligation to report income; it removes only the MTD quarterly and software requirements.
What sole traders below the threshold should do now
Traders with qualifying income at or below £50,000 on the 2024 to 2025 return are not mandated from April 2026, though many will fall within scope from April 2027 when the threshold drops to £30,000. Those with income near either threshold benefit from monitoring turnover through the year rather than waiting for the January filing deadline to reveal the position.
Below-threshold traders can continue with their current record-keeping and annual Self Assessment process. No quarterly updates are required until mandation applies. Voluntary sign-up remains an option for early practice, but volunteers face penalty points for late quarterly updates from the point of joining, unlike mandated users in 2026 to 2027.
Practical preparation includes maintaining clear income and expense records by category and tracking gross turnover against the staged thresholds. Registration for Self Assessment remains the foundation — MTD for ITSA is available only to those already in Self Assessment who have filed a return.
Your next step
Sole traders preparing for MTD for ITSA can begin by confirming their qualifying income against the staged thresholds and checking exemption status on GOV.UK. Those still filing under the traditional annual cycle may find the sole trader Self Assessment guide useful for how trading profit flows into the return that determines mandation.
The January deadline and payment structure remain central. The Self Assessment deadlines guide sets out filing and penalty dates that still apply to the annual return, and payments on account explains how the January and July instalments interact with MTD's quarterly rhythm. Traders not yet registered for Self Assessment should start with how to file Self Assessment before signing up for Making Tax Digital.