How to Get Ready for MTD for Income Tax?

Making Tax Digital for Income Tax Self Assessment, MTD for Income Tax, or MTD for ITSA, will change the way sole traders and landlords report their income to HMRC. Instead of sending in one paper tax return each year, those under the new rules must keep digital records and submit updates every quarter using approved software. This is compulsory. It’s a big move away from spreadsheets and boxes of receipts.

The rollout starts from April 2026, but not everyone will be affected at once. People with higher incomes will be affected first, with others joining in over the following years. While that date might seem far away, don’t be misled. The habits you form now for how you keep your records, the software you pick, will determine how smoothly you adapt. Leave it until the last minute, and you risk stress, missed deadlines, and errors.

Why is this important? Because HMRC is changing how it collects and reviews tax information. With quarterly digital updates, they’ll get a clearer and more regular view of your income and expenses, instead of waiting for one annual return. For many sole traders and landlords, this means adjusting your routine, choosing new software, and rethinking how you plan your taxes.

Now is the right time to act. If you get ready early, you can have enough time to choose the right tools, organise your digital records, and fully understand what HMRC needs from you. By the time MTD for ITSA applies to you, you’ll already be set up. If you want to stay in control of your tax position and avoid last-minute stress, start getting ready early. It just makes sense.

Disclaimer

This article is for general information only and is based on current HMRC guidance as on 19th January, 2026. Tax rules and Making Tax Digital requirements can change, and how they apply will depend on your personal circumstances. The content does not replace professional advice. For advice tailored to your situation, it is best to speak with a qualified accountant or tax adviser.

This information is current as of January 19, 2026 and based on: 

• Finance Act 2024
• HMRC Guidance (Updated December 2025)
• Making Tax Digital Regulations 2021 (Amended 2024)

Making Tax Digital for Income Tax Self Assessment or MTD for ITSA is changing how sole traders and landlords keep records and report income tax to HMRC. Instead of rushing once a year to gather all your figures, you’ll now keep digital records of income and expenses and send updates to HMRC throughout the year.

The main idea is to move tax reporting into the digital age. You’ll use compatible accounting software to keep your records and send regular updates straight to HMRC. These updates show how your business or rental income is performing across the year, rather than only at the end of it. This means you’ll always know your tax position, not just at year end, but all along.

If are into VAT returns, this will sound familiar. MTD for ITSA is basically following the same model as Making Tax Digital for VAT. VAT-registered businesses already use approved software to file VAT returns. Now, income tax is going the same way, with digital requirements for self-employed and landlords.

The main purpose of HMRC is to completely shift to digital record-keeping and reporting. HMRC wants more accurate information, sent more frequently, straight from your software and not from stacks of paper or last-minute spreadsheets. This reduces errors, gives everyone clearer insights, and brings income tax up to date with modern business practices.

All of this is part of a wider plan to digitise the UK tax system. HMRC is shifting from paper based processes to real-time data. The ultimate aim? Simpler, more predictable tax reporting for both taxpayers and HMRC.

MTD for ITSA replaces the old annual Self Assessment return with digital quarterly updates. You’ll need to use HMRC-approved software for this, and at the end of the year, you’ll submit a final return. For many sole traders and landlords, this is the biggest change to income tax reporting in years and it’s smart to prepare early.

Making Tax Digital Timeline

• March 2015
  Making Tax Digital was first announced in the Spring Budget.
• July 2017
  The original rollout plans were revised following concerns raised by professional bodies and businesses.
• April 2019
  MTD for VAT became mandatory for businesses with taxable turnover above the VAT threshold, which was £85,000 at the time.
• April 2021
  Digital links became compulsory as part of MTD for VAT compliance.
• April 2026
  MTD for Income Tax Self Assessment becomes mandatory for sole traders and landlords with qualifying income over £50,000.
• April 2027
  The threshold reduces, bringing in sole traders and landlords earning over £30,000.
• April 2028
  MTD for Income Tax Self Assessment is expected to apply to those earning over £20,000, subject to legislation.
• What’s next
  HMRC is expected to confirm further phases of the MTD rollout in due course.

Making Tax Digital for Income Tax Self Assessment isn’t being rolled out to everyone all at once. HMRC is introducing it in stages, depending on the income type and level. If you earn money from self-employment, property, or both, this is something you really need to pay attention to.

• MTD for ITSA mainly affects people who already file Self Assessment tax returns because they run a business or get rental income.
• If you’re a self-employed sole trader, you’re right in the middle of this change. Once these rules apply to you, you’ll need to keep digital records and send updates every quarter.
• Residential and commercial landlords are also included. Whether you let out a single property, multiple flats, or even shops and offices. It doesn’t matter how many properties you have; if you receive rental income, you’re included.
• For mixed income individuals who earn money from both self employment and property, HMRC looks at your total qualifying income across all sources and combine figures to determine when you must join MTD for income tax.

In short, if you already submit a Self Assessment return because of business or property income, you can expect Making Tax Digital for ITSA to apply to you soon.

MTD for ITSA requires eligible businesses and landlords to keep digital records and submit quarterly updates to HMRC using approved software.

• From 6 April 2026, Making Tax Digital for MTD for ITSA will be compulsory if your total qualifying income is more than £50,000. This covers profits from self employment and property income, calculated before tax.
• From 6 April 2027, the threshold drops to £30,000, bringing more earners into the system.
• The government has also set out plans to reduce the limit again. From April 2028, those earning over £20,000 are expected to fall within MTD for ITSA. While this final step could still be revised, it clearly shows where the rules are heading.

If your income goes above or below these income thresholds, the timing can affect when you must comply. That is why keeping accurate records throughout the year and planning ahead is essential.

Example: Combined income for threshold tests

If your 2024 to 2025 tax return showed combined self‑employment and property income of £53,000, this would put you above the first MTD threshold. You would need to start quarterly submissions from 6 April 2026. This example shows how HMRC assesses whether you’re in scope for MTD based on the previous year’s qualifying income.

Example: Using the Rent‑a‑Room scheme

If you used the Rent‑a‑Room scheme and declared £55,000 of UK property income in 2024 to 2025, you would still need to create digital records for all your property income, even the part covered by Rent‑a‑Room, in the 2026 to 2027 tax year.

According to gov.uk, around 780,000 people with business or property income above £50,000 are expected to move to MTD for ITSA from April 2026. A further 970,000 individuals are set to join from April 2027.

Voluntary Early Adoption of MTD for ITSA

You do not have to wait until MTD for ITSA becomes mandatory. HMRC allows businesses and landlords to sign up early if they want.

Starting early can make things easier. You get extra time to learn about digital record keeping and quarterly updates. You can try out different software, see what works for you, and sort out any issues before the deadlines carry real consequences.

In fact, many people who sign up early find that the transition is much smoother. It gives your self-employed accountant time to set everything up correctly and integrate your records with HMRC well before MTD becomes mandatory.

Exemptions from Making Tax Digital for ITSA

If you qualify for an exemption, you don’t have to use Making Tax Digital (MTD) for Income Tax Self Assessment. However, this doesn’t mean you are free from your tax responsibilities. You’re still required to report your income and gains through a standard Self Assessment tax return.

HMRC sets out different types of exemption, depending on your personal circumstances, income level, and the type of tax return you file.

Types of exemption

There are two main types of exemption from MTD for ITSA:

A permanent exemption means you don’t have to use MTD unless something significant changes in your situation.

A temporary exemption means you’re not required to follow MTD rules until at least the 2027 to 2028 tax year.

Based on information HMRC already has about you, some exemptions are granted toyou automatically. Others require you to contact HMRC and apply, along with supporting evidence.

Permanent exemptions

Permanent exemptions usually apply automatically and remain in place unless something changes.

If you’re “digitally excluded”, you may need to apply for a permanent exemption. This applies where it is not reasonable for you to use accounting software to keep digital records or send quarterly updates and tax returns. This could be due to health issues, disability, age related factors, or lack of access to reliable internet services.

If your qualifying income is £20,000 or less, you don’t need to worry. MTD for ITSA doesn’t apply, and you don’t have to do anything.

Automatic permanent exemptions

You are automatically exempt from MTD for income tax and cannot sign up if you fall into one of the following categories:

• You do not have a National Insurance number
• You submit a tax return as a trustee, including charitable trustees and trustees of certain pension schemes
• You submit an Income Tax return for a non resident company
• You are a Lloyd’s member with no self employment or property income
• You act as a personal representative for someone who has died
• You submit a tax return on behalf of someone else because you hold lasting or enduring power of attorney, or you have been appointed by a UK court due to their lack of mental capacity

Temporary exemptions until April 2027

Some individuals are exempt from MTD for ITSA until April 2027. After that, if your qualifying income is above £30,000, you may have to use MTD.

You’re automatically exempt until April 2027 if your 2024/25 tax return includes any of the following:

• You claimed averaging relief
• You claimed qualifying care relief (like foster care)
• You received income from trusts or estates

If these aren’t in your 2024/25 return but you expect them for 2026/27, you’ll need to apply for a temporary exemption.

Non-UK resident entertainers and sportspersons must apply for a temporary exemption until April 2027, even if this income appeared on previous tax returns.

Temporary exemptions for international tax rules

You might be eligible for a temporary exemption until April 2027 if your tax return includes (or is expected to include) the SA109 supplementary page. This generally applies to non-UK residents, people who are tax resident elsewhere, or those claiming overseas workday relief, split-year treatment, or foreign income and gains.

Sometimes this exemption is automatic, but in other cases, you’ll need to apply to HMRC, depending on your situation.

Temporary exemptions beyond April 2027

Some groups will continue to be exempt beyond April 2027, although HMRC hasn’t announced when MTD will begin for them.

You’re automatically exempt if your 2024/25 tax return was filed as:

• An employed minister of religion
• A recipient of the Married Couple’s Allowance (born before 6 April 1935)
• A recipient of the Blind Person’s Allowance
• A Lloyd’s member with self-employment or property income

If this didn’t apply in 2024/25 but will in 2026/27, you’ll need to apply for an exemption.

Making Tax Digital for Income Tax isn’t actually as tricky as it might look at first glance. Once you get used to how it works, planning and staying on top of things becomes much easier. The whole process comes down to three main steps: keeping digital records, submitting quarterly updates, and making a final declaration when the tax year ends.

1. Digital Record Keeping

Digital record keeping is the core of MTD for ITSA. HMRC wants you to keep all your business or property records in a digital format, and you’ll need to use compatible software.

By “digital records,” they mean all the details about your income and expenses such as sales, rental income, allowable costs, and the transaction dates. You must keep records electronically and store in software that can integrate directly with HMRC systems.

Just using spreadsheets isn’t enough for most people anymore. You can still use them, but only if they connect to HMRC through approved software. Manually typing numbers into the HMRC portal isn’t allowed under the new rules. The data has to move straight from your records to HMRC, all digitally, with no manual entry.

That’s why choosing the right software from the start really matters. The right software keeps your records organised, saves you time, and helps prevent mistakes. You can use HMRC tool to find software that meets your needs for Making Tax Digital for Income Tax.

Example: Separate digital records and quarterly updates

If you have more than one source of income, you must treat them separately for digital records and quarterly updates. For example, an electrician and driving instructor who runs two separate sole trader businesses must keep separate digital records for each business and send quarterly updates for both. This means you manage your records by income source rather than mixing everything together.

Example: Multiple properties in one business

For landlords, you can treat all UK properties as one property business. If you have multiple lets in the UK, you keep one set of digital records for all UK property income and expenses and send quarterly summaries for that single property business.

2. Sending Quarterly Updates

Instead of just sending in one tax return at the end of the year, you’ll now send updates every three months.

Each one covers a quarter of the year, starting in April:

• 6 April to 5 July (due by 7 August)
• 6 April to 5 October (due by 7 November)
• 6 April to 5 January (due by 7 February)
• 6 April to 5 April (due by 7 May)

After each quarter ends, you have one month to send that update to HMRC. These updates give HMRC a snapshot of how much you’ve earned and spent so far.

If it suits you better, and your software supports it, you can choose to align your update periods with the end of each month. This option is often referred to as a calendar quarters. Once chosen, your reporting periods will run as follows:

• 1 April to 30 June (due by 7 August)
• 1 April to 30 September (due by 7 November)
• 1 April to 31 December (due by 7 February)
• 1 April to 31 March (due by 7 May)

Note that the submission deadlines stay the same.

You must make this choice before sending your first update for the tax year you want it to apply to.

Each quarterly update must include your total income, your total allowable expenses, and your estimated profit or loss for that quarter. Don’t worry, you’re not paying tax every quarter. The main advantage is that you get a clearer idea of your tax position as the year goes on.

For multiple source of self-employment and/or rental income

If you fall within Making Tax Digital for Income Tax and have more than one source of income, the reporting rules are stricter.

Where you have both self-employment and rental income, or more than one self-employed business, you must send separate quarterly updates for each income source. This means reporting income and expenses individually for every self-employment, as well as separate quarterly updates for property income and costs. The only exception is where a property income easement applies, such as certain jointly owned properties.

If you receive rental income from both UK and overseas properties, the reporting must also be split. All UK property income is reported together in one set of quarterly updates, while foreign rental income must be reported separately.

This approach helps keep each income stream clear and correctly reported under Making Tax Digital.

Examples:

Suppose in your 2024/2025 tax return you claimed a trading income allowance and showed property income of £60,000 and self‑employment income of £1,900. In the 2026 to 2027 tax year, you would need to keep digital records of both property and self‑employment income because your property income exceeds the allowance threshold.

A landlord with turnover under £90,000 can report the total rental income and total expenses for the quarter, rather than sending every single transaction.

3. Final Declaration and Tax Payment

After the tax year ends on 5 April, you send in your final declaration. This is where you confirm all your income, expenses, and any last adjustments for the tax year. This final declaration replaces your old Self Assessment tax return.

You have until 31 January after the tax year ends to submit this declaration and pay any tax you owe.

The quarterly updates lead into the final stage. They build the foundation, and the final declaration pulls everything together to confirm the final figures.

Getting ready for Making Tax Digital for Income Tax Self Assessment does not have to wait until it becomes mandatory for you. Starting early gives you time to develop good record keeping habits. A clear plan today can save hours of work and stress later.

Step by step checklist

• Check your total qualifying income from self employment and property
• Compare your income against the MTD thresholds to see when the rules apply to you
• Choose MTD compatible accounting software approved by HMRC
• Pick software that suits your business size and is easy to use
• Start keeping digital records for income and expenses straight away
• Record transactions regularly rather than waiting until year end
• Sign up for MTD for IT once you are ready to join
• Link your accounting software to HMRC
• Add quarterly update deadlines to your calendar
• Schedule the final declaration deadline for 31 January in advance

Get help from accountants

Bringing in a professional is a smart move when you’re shifting to MTD for ITSA. A tax accountant or agent can manage the technical details, review your records, and take care of those regular submissions for you.

Letting a specialist handle things takes a lot of pressure off you. Plus, they know exactly what HMRC expects and how to report everything properly. They’ll spot any issues before they become bigger problems and help you manage your tax planning all year round.

With the right support, MTD for ITSA becomes a structured process rather than an added burden. If you want peace of mind and more time to focus on running your business, teaming up with an accountant just makes sense.

Making Tax Digital for Income Tax Self Assessment brings a big change in how tax is managed. GoForma helps you prepare early and move to the new system without confusion or last minute pressure.

We can help you choose the right MTD-compatible accounting software, tailored to how you work and the type of income you earn.

We believe in using smart technology to make tax easier. That’s why we’re a FreeAgent Platinum Partner. FreeAgent is HMRC-approved, fully compliant for MTD for ITSA, and we include it free with all our accounting packages, so you keep more of your money instead of spending it on software every year.

GoForma takes care of your quarterly updates. Our team reviews your records, prepares your figures, and submit regular updates to HMRC on time. You get peace of mind and a real-time picture of your income and expenses all year round.

With GoForma, switching to MTD for income tax becomes much simpler. You get expert advice, reliable reporting, and support from people who understand both the MTD rules and the reality of running a business or managing property income.

If you want a smooth start and a clear plan, book a free consultation with us today. We’ll create a personalised MTD readiness plan based on your income, your goals, and your timeline.

FAQs on MTD ITSA

What is the threshold for MTD for Income Tax?

MTD for Income Tax applies based on your total qualifying income from self employment and property. From April 2026, the threshold is over £50,000, and from April 2027 it reduces to over £30,000. The government also plans to lower it further to £20,000 in later years.

When does making tax digital for income tax start?

Making Tax Digital (MTD) for Income Tax starts in phases from April 2026, initially for self-employed individuals and landlords with qualifying income (from self-employment/property) over £50,000, then expanding to those with income over £30,000 (April 2027) and £20,000 (April 2028).

Does MTD for income tax apply to partnerships?

No, MTD for Income Tax does not currently apply to partnerships. HMRC plans to bring partnerships into the system at a later date, but no start date has been confirmed yet. Furthermore, partnerships cannot voluntarily sign-up for Making Tax Digital for Income Tax at the present time, either.

Is it turnover or income that MTD for Income Tax counts?

MTD for Income Tax looks at your total qualifying income, not turnover after costs. This includes gross income from self employment and property before expenses are deducted.

Do pensions or savings interest count towards the MTD income tax threshold?

No, pensions and savings interest do not count towards the MTD for Income Tax threshold. Only gross income from self employment and property is included when working out if the rules apply to you.

is there any separate MTD income tax thresholds for self-employment and rents?

No, there are no separate thresholds for self employment and rental income. HMRC adds both together and looks at your total qualifying income to decide when MTD for Income Tax applies.

What if my income goes above and then below the MTD threshold?

Once you join MTD for Income Tax, either mandatorily or voluntarily, you normally have to stay in the system. This applies even if your income later falls to £50,000 or below, or £30,000 or below from April 2027. If your qualifying income stays under £30,000 for three years in a row while you are in MTD, you can then apply to leave the scheme.

Does MTD for income tax apply if I inherit one rental property?

Yes, it can apply if the rental income from the inherited property counts as qualifying income. If your total property and self employment income goes over the MTD threshold, you will need to follow the MTD for Income Tax rules.

When are the quarterly updates due?

Each quarterly update must be submitted by the 7th day of the month after the quarter ends. For example, the update for 6 April to 5 July is due by 7 August, and the same one-month rule applies to each subsequent quarter.

What if I make a mistake in one quarter?

If you make a mistake in a quarterly update, you can correct it in your next update or through your software before the final submission. HMRC allows adjustments, so small errors won’t cause major problems as long as they are fixed promptly.

Do I need MTD VAT to join MTD income tax?

No, you do not need to be signed up for MTD for VAT to use MTD for Income Tax. The two systems are separate, and you can join MTD for Income Tax even if you are not VAT registered.

What happens if I have more than one business?

If you have more than one business, or are a sole trader and a landlord, HMRC adds the income from all of them together. If your total qualifying income goes over the MTD threshold, MTD for Income Tax will apply to you. For each business, you will need to submit separate quarterly updates. But, you’ll only need to submit a single Final Declaration.

Do I record the total income/expenses for jointly owned property, or just my share?

You record just your share of income and expenses for jointly owned property. HMRC only wants the portion that belongs to you, not the full amount for all owners.

Can I use spreadsheets for MTD for IT?

You can still use spreadsheets, but they cannot work by themselves. You will need bridging software to pass the figures digitally from the spreadsheet to HMRC, which means using more than one system to stay compliant. Many people prefer using one MTD ready platform, such as FreeAgent, as it keeps records and submissions in one place and gives a clearer view of their finances.

How often do I need to submit a MTD?

Under MTD for Income Tax, you submit a separate quarterly update for each type of income, such as self employment and property. All these updates are then combined to form your final end-of-year tax return.

Will penalties be the same under MTD?

Penalties under MTD for Income Tax will follow a new points based penalty system, similar to the VAT rules brought in during 2023. You will not get a fine for the first late submission, but points build up if delays continue.

Can an accountant handle MTD for me?

Yes, an accountant can manage MTD for Income Tax on your behalf. At GoForma, our team can set up your software, keep your digital records up to date, and submit quarterly updates to HMRC, giving you peace of mind and more time to focus on your business or property income.

Resources:

HMRC Policy Paper - Extension of Making Tax Digital for Income Tax Self Assessment

Making Tax Digital for Income Tax Self Assessment for sole traders and landlords

Getting ready for the new way to do tax returns

HMRC videos and webinars for Making Tax Digital for Income Tax

HMRC Tool to Find software that works with Making Tax Digital for Income Tax