Making Tax Digital for Income Tax (MTD for ITSA) is no longer on the horizon — it is here. From 6 April 2026, HMRC is fundamentally changing the way sole traders and landlords report their income. If you have qualifying gross income above £50,000, you are required to move to digital record-keeping and quarterly reporting right now.

This guide explains exactly what Making Tax Digital for Income Tax means, who it affects, what you need to do, and how NDCA Chartered Accountants can make your transition straightforward.

What Is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax — officially known as MTD for ITSA (Income Tax Self Assessment) — is HMRC’s programme to replace the annual Self Assessment tax return with a digital, quarterly reporting system. Rather than filing once a year in January, you will keep digital records throughout the year and submit income and expense summaries to HMRC every quarter using compatible software.

MTD for VAT has already been mandatory for most VAT-registered businesses since 2019. MTD for Income Tax extends the same digital-first approach to the self-employed and landlords — and it is widely considered the most significant reform to UK tax administration since Self Assessment was introduced over 30 years ago.

Who Does Making Tax Digital for Income Tax Affect?

MTD for ITSA applies to sole traders and landlords. It is being introduced in three phases based on qualifying gross income — meaning total income before expenses, not profit:

•6 April 2026 — Qualifying income above £50,000

•6 April 2027 — Qualifying income above £30,000

•6 April 2028 — Qualifying income above £20,000

HMRC will use your 2024/25 Self Assessment return to determine whether you fall into the first wave from April 2026. If your gross income from self-employment and property combined exceeds £50,000, you are in scope — regardless of whether HMRC has written to you directly.

Important: General partnerships are currently excluded from MTD ITSA, with no confirmed start date. Limited companies are also outside scope. However, individual partners with sole trade or property income in their own name may still be caught if their personal qualifying income exceeds the threshold.

How Does Making Tax Digital for Income Tax Work?

Step 1: Digital Record-Keeping

You must maintain digital records of all your income and expenses using HMRC-recognised MTD-compatible software. Spreadsheets and paper records alone will not satisfy the requirement, though bridging software that links spreadsheets to HMRC’s systems is permitted.

Step 2: Quarterly Updates

Four times a year, you will submit a summary of your income and expenses to HMRC through your software. Each quarterly update must be submitted within one month of the quarter end. The quarters run with the tax year, so the first deadline in 2026/27 falls on 7 August 2026.

These updates are reporting obligations — not payment obligations. Your actual tax payment dates (31 January and 31 July for payments on account) remain unchanged.

Step 3: Final Declaration

After your fourth quarterly update, you will submit a Final Declaration to confirm your total income and tax position for the year. This replaces your annual Self Assessment return. Crucially, HMRC has confirmed that all MTD ITSA taxpayers must submit this through MTD-compatible software — the existing HMRC online portal will no longer be available for those within the MTD regime.

Penalties Under MTD for Income Tax

HMRC is replacing the current flat-fee late filing fines with a points-based penalty system. Each missed quarterly submission earns one penalty point. Once you reach four points, a £200 fixed penalty applies — and each subsequent late submission triggers a further £200 fine.

Soft landing for 2026/27: HMRC will not issue penalty points for late quarterly updates during the first tax year (2026/27). This gives taxpayers time to adapt — but quarterly updates must still be submitted before you can file your Final Declaration. Crucially, the soft landing does not apply to the Final Declaration itself (due 31 January 2028), and late payment penalties and interest on overdue tax still apply throughout.

From 2027/28, the full penalty points regime is in force. HMRC has also announced increased late payment penalties for MTD ITSA from 1 April 2027 — meaning the cost of non-compliance will rise significantly.

Are There Any Exemptions from Making Tax Digital?

Yes. HMRC recognises a limited set of exemptions, including on grounds of age, disability, religious objection to using electronic communications, or where digital access is not reasonably practicable. Taxpayers under a Power of Attorney or Court of Protection deputyship are permanently exempt.

Certain groups — including some trust and estate taxpayers, those claiming averaging relief, and non-UK resident entertainers and sportspeople — have been granted a one-year deferral until April 2027.

If you believe you may qualify for an exemption, it is essential to seek professional advice. An incorrect assumption about exemption status will not protect you from penalties.

Your MTD for Income Tax Checklist: What to Do Now

•Check your qualifying income from your 2024/25 tax return to confirm whether you are in scope from April 2026.

•Choose and set up HMRC-recognised MTD-compatible software before your start date.

•Sign up for MTD through HMRC’s online service — or ask your accountant to do it on your behalf.

•Begin keeping digital records from your MTD start date — 6 April 2026 if you are in the first wave.

•Diarise your four quarterly submission deadlines and plan who will be responsible for each one.

•Remember: you still need to file your 2025/26 Self Assessment tax return under the old system before your MTD start date.

Frequently Asked Questions About MTD for Income Tax

Does MTD for Income Tax replace Self Assessment entirely?

Not entirely. MTD replaces the annual Self Assessment tax return for those in scope. The Final Declaration performs the same function but must be submitted through MTD-compatible software. Employment income reported via PAYE is unaffected.

Does MTD apply to landlords?

Yes. Landlords with qualifying rental income — or rental income combined with self-employment income — above the relevant threshold are included. A landlord with a single buy-to-let property reporting £55,000 gross rental income will be in scope from April 2026.

Can my accountant submit MTD returns on my behalf?

Yes. Your accountant can be authorised as your agent and submit quarterly updates and your Final Declaration on your behalf using their agent software. The legal obligation remains yours, but the practical responsibility can be fully delegated.

What if my income drops below the threshold?

If your income falls below the relevant threshold in a subsequent tax year, you may be able to exit MTD — but you must confirm your position with HMRC and cannot exit mid-year once mandated.

How NDCA Can Help You with Making Tax Digital

At NDCA Chartered Accountants, we are helping sole traders and landlords across the UK prepare for MTD for Income Tax. Whether you need help confirming whether you’re in scope, choosing the right software, or having us manage your quarterly submissions entirely — we can take care of it.

Our MTD support services include:

•Qualifying income assessment and MTD start date confirmation

•Software selection, setup, and one-to-one training (Xero, QuickBooks, FreeAgent)

•Ongoing bookkeeping and digital record maintenance

•Quarterly update preparation and submission

•Year-end Final Declaration filing

•Tax forecasting so you always know what you owe in advance

Get in touch with NDCA today — call 07481 042637 or email info@nd-ca.co.uk and let us make your MTD transition seamless.