Making Tax Digital for Income Tax (MTD ITSA), which begins to apply from 6 April 2026, is changing the way sole traders and landlords report their income and expenses to HMRC. Instead of just submitting a single annual Self Assessment, you now need to provide quarterly updates along with a final declaration.
Even though MTD ITSA is now being rolled out, many landlords and sole traders still have questions about how it works, which thresholds apply, and what exactly they need to do. To make things easier, our team of experienced accountants has put together practical answers to the most common questions, so you can understand the process and stay compliant without the stress.
1. What is Making Tax Digital for Income Tax (MTD ITSA)?
MTD ITSA is a government initiative that requires certain taxpayers, primarily sole traders and landlords, to maintain digital records of their income and expenses. It changes the way you meet your Self Assessment obligations by requiring quarterly updates and an End of Period Statement (along with a final declaration), rather than a single annual tax return for those income sources. Using approved software, you submit information digitally to HMRC, helping you monitor your tax obligations in real time and decreasing the risk of errors or delayed submissions.
2. Who Needs to Sign Up for MTD ITSA?
You need to sign up if you meet the following criteria:
- Qualifying income: Total gross income from self‑employment and/or UK property.
- Thresholds (based on qualifying income):
- £50,000 or more in the 2024–25 tax year → MTD ITSA applies from 6 April 2026.
- £30,000 or more in the 2025–26 tax year → MTD ITSA applies from 6 April 2027.
- HMRC has announced that the threshold will be reduced to £20k in 2026–27, with those taxpayers scheduled to join from 6 April 2028, subject to legislation.
Exclusions: PAYE salary, dividends, and partnership income are not counted towards the current qualifying income test, and partnerships are planned to join the regime at a later date. Because your income can fluctuate, you must check your qualifying income each tax year to see whether you meet the thresholds. Once you fall within MTD ITSA, you must use HMRC‑compatible software to maintain digital records and submit quarterly updates and a final declaration on time to prevent penalties.
3. When Does MTD ITSA Become Mandatory?
IMTD ITSA is being introduced in phases based on income levels. From 6 April 2026, it is mandatory for individuals with qualifying income over £50,000, based on their 2024–25 tax return. From 6 April 2027, the threshold reduces to £30,000, based on the 2025–26 tax year. From 6 April 2028, there is a proposed reduction to £20,000, based on the 2026–27 tax year, subject to legislation.
Taxpayers who fall within these thresholds must comply from the start of the relevant tax year, while those below the thresholds can choose to sign up voluntarily to get started early. The official guidance on GOV.UK confirms the start dates and mandatory thresholds, so it is important to follow the published timelines to stay compliant.
4. How Do I Sign Up for MTD ITSA?
Signing up for MTD ITSA is very simple:
- You must already be registered for Self Assessment and have submitted at least one tax return.
- You sign up for MTD ITSA using HMRC’s online sign‑up service on GOV.UK and then link your MTD‑compatible software to your HMRC account.
- If you use an accountant or tax agent, they can be authorised to sign you up and manage submissions on your behalf.
- During the online sign‑up, you log in with your Government Gateway user ID and password and may be asked to complete identity checks, such as answering security questions or confirming details HMRC already holds.
5. What Should I Include in My MTD ITSA Quarterly Updates?
Your quarterly updates must contain:
- Total income from your self‑employment and property businesses.
- Total expenses, including allowable business and property deductions.
These updates provide HMRC with summary figures during the year, while detailed accounting adjustments, reliefs, and allowances are generally made in the End of Period Statement and confirmed in the final declaration. These updates must be submitted digitally using MTD‑compatible software, which sends the data directly to HMRC.
6. Which Documents Do Landlords Need to Keep for MTD ITSA?
Landlords should keep clear, well‑organised digital records, including:
- Details of rental income and any associated receipts.
- Evidence of allowable expenses (repairs, maintenance, letting agent fees, insurance, etc.).
- Invoices and bills supporting each expense.
- Bank statements showing rental income received and payments made.
- Tenancy agreements and related documents to support the nature and terms of the rental.
You do not need to send receipts to HMRC with your submissions, but you must keep digital copies as evidence in case HMRC requests them in the future.
7. Can I Use HMRC-Approved Free Software for MTD ITSA?
HMRC provides a list of MTD‑compatible software options, including both free and paid solutions. Free software usually supports basic record‑keeping and quarterly updates, while paid options generally provide advanced features such as mobile receipt scanning and integration with existing accounting systems. Software listed on GOV.UK is recognised as compatible with MTD ITSA, but individual products may not yet support every MTD ITSA function, so it is important to check that your chosen software meets your specific reporting needs.
8. Do I Still Need MTD Software if I Use an Accountant?
Yes, you still need to ensure your records are kept digitally in a format that supports MTD. Even if your accountant or tax agent submits the quarterly updates and final declaration, you remain legally responsible for the accuracy and completeness of the data. MTD‑compatible software lets you capture income and expenses in real time and gives your accountant a solid digital dataset to work from, so your updates and final declaration can be submitted accurately and on time.
9. What Are the Typical Accountant Fees for MTD ITSA?
Accountant fees for MTD ITSA vary depending on the complexity of your situation. Sole traders with a single, straightforward income stream usually pay less than landlords with multiple properties or individuals with several different businesses. Main elements include the number of income sources, volume of transactions, and how organised your records are. While fees are an extra cost, working with an experienced accountant can save you time, reduce the risk of mistakes, and help you prevent penalties and interest.
10. What Are the Penalties for Not Doing MTD ITSA Correctly?
HMRC is introducing a points‑based penalty system for delayed MTD ITSA submissions, alongside penalties and interest for late tax payments. However, for the first year of mandation (the 2026–27 tax year), HMRC has confirmed it will not charge penalties for missing quarterly update deadlines. Annual obligations still apply in full: your final declaration and any tax due must be submitted and paid on time, or you might incur penalties and interest.
Final Thought
Making Tax Digital for Income Tax (MTD ITSA) is a major change for sole traders and landlords, requiring digital record‑keeping, quarterly updates, and a final declaration. Through understanding the rules, choosing compliant software, and working with an experienced accountant where needed, you can stay compliant, evade penalties, and gain better visibility over your tax affairs.
Get MTD ITSA Ready with SwiftAcc. Our expert accountants can help sole traders and landlords set up reliable digital records, manage quarterly updates, and prepare accurate final declarations in time for 2026 and beyond. Contact us today to simplify your tax reporting and stay ahead of the new MTD ITSA rules.
