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Making Tax Digital for Income Tax (MTD for ITSA) – what you need to know

Making Tax Digital for Income Tax (MTD for ITSA) is a tax system reform introduced by HM Revenue & Customs (HMRC). It changes how income is reported by individuals running a business in the UK.

If you are self-employed (sole trader) or earn income from property (landlord), the new rules will affect how you keep records and report your income to HMRC.

From 6 April 2026, the traditional model of submitting one annual Self Assessment will be replaced by:

  • digital record keeping
  • quarterly reporting to HMRC

👉 Official HMRC guide: Making Tax Digital for Income Tax – step by step

Who will MTD apply to in the UK?

The requirement to join MTD is based on your gross income (turnover), not your profit.

HMRC uses what’s called qualifying income, which includes:

  • income from self-employment
  • property (rental) income

Implementation timeline:

  • From 6 April 2026 → income above £50,000
  • From 6 April 2027 → income above £30,000
  • From April 2028 (planned) → income above £20,000

👉 Check eligibility: HMRC – Check if you’re eligible for MTD for Income Tax

How does Making Tax Digital for Income Tax work?

The reform replaces a once-a-year submission with regular reporting throughout the year. It consists of three key elements:

1. Digital record keeping

You must keep records of your income and expenses using MTD-compatible software.

This software must allow you to:

  • create and store digital records
  • edit data
  • submit information directly to HMRC

⚠️ Paper records alone will no longer be sufficient.

👉 More details: Digital record-keeping notice for MTD

2. Quarterly updates

Instead of one annual return, you will need to submit four updates per year to HMRC.

Important:

  • Reports are submitted for each income source separately
    (e.g. business income and rental income)

👉 How to submit: Use Making Tax Digital for Income Tax

3. Final declaration

At the end of the tax year, you will submit a final declaration, which includes:

  • confirmation of your income data
  • additional income sources (e.g. dividends)
  • final tax calculation

💡 Important:
Quarterly updates are for reporting only.
You still pay tax under the current system:

  • 31 January
  • 31 July

Do you need special software?

Yes.

MTD requires the use of HMRC-compatible software.

  • Standard spreadsheets like Excel are not sufficient on their own
  • They can only be used if connected to bridging software

👉 Find approved software: Find software compatible with MTD for Income Tax

What are the penalties for non-compliance?

HMRC is introducing a points-based penalty system for late submissions.

  • Each missed deadline = 1 penalty point
  • Once you reach a certain number of points → financial penalty applies

👉 Official guidance: Penalties for Income Tax Self Assessment

FAQ – frequently asked questions

Does MTD mean paying tax 4 times a year?
No. You still pay tax under the current deadlines.

Is MTD already in place?
Yes, for VAT (MTD for VAT).
For income tax, it starts from April 2026.

Does MTD apply to LTD companies?
No. This stage applies only to sole traders and landlords.

Is the threshold based on profit?
No. It is based on gross income (turnover).

What is the biggest risk?

The biggest mistake is leaving it until the last minute.

Switching to digital record keeping earlier means:

  • better control over your finances
  • less stress when deadlines approach
  • smoother transition to the new system

💬 Have questions?
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