If you’re self-employed or a landlord, there’s a big change on the horizon that could affect how you report your income to HMRC. From April 2026, the next phase of Making Tax Digital (MTD) — known as MTD for Income Tax Self-Assessment (MTD for ITSA) — will begin.
What Is MTD for ITSA?
Making Tax Digital is HMRC’s plan to modernise the tax system by requiring individuals to keep digital records and report their income electronically.
Under MTD for ITSA, the way you file your Self Assessment will change. Instead of submitting one annual tax return, you’ll send quarterly updates of your income and expenses through MTD-compatible software, followed by a final declaration at year-end to confirm your figures.
Who Will Be Affected First?
From 6 April 2026, MTD for ITSA will apply to:
- Sole traders and landlords whose combined gross income (before expenses) from self-employment and property exceeds £50,000 per year. This is a key distinction as many individuals think that it is based on profit they are declaring on their tax return – this is not the case!
If your income is lower, you’ll be included later:
| Start Date | Income Threshold | Who’s Included |
|---|---|---|
| April 2026 | £50,000+ | First wave: higher earners |
| April 2027 | £30,000+ | Second wave |
| April 2028 | £20,000+ | Third wave (expected) |
HMRC will use your 2024/25 tax return to decide if you’re in scope and will contact affected taxpayers in early 2026.
What Will Change?
1. Digital Record Keeping
You’ll need to record your income and expenses using MTD-compliant software.
2. Quarterly Updates
Every three months, you’ll submit a digital summary of your income and expenses. These aren’t tax bills — just updates to HMRC.
3. Final Declaration
After the tax year ends, you’ll file a final declaration to confirm your figures and finalise your tax liability.
4. New Penalty System
HMRC is introducing a points-based penalty system for late submissions — more flexible, but still something to avoid!
What’s Not Changing
- Tax payment deadlines (31 January and 31 July) remain the same.
- You can still use an accountant or tax agent to manage submissions.
- Partnerships, trusts, and non-resident landlords are not yet included.
Why the Change?
HMRC’s goal is to reduce errors and modernise the tax system. Quarterly updates should make it easier to track how much tax you owe and prevent last-minute surprises but will give you more admin to worry about.
For many small businesses, the move to digital accounting also brings everyday benefits — better record keeping, faster reporting, and more visibility over cash flow.
FAQs About MTD for ITSA
Q1. How do I know if I’ll be affected?
If your combined self-employment and rental income exceeds £50,000 in 2024/25, you’ll join MTD from April 2026. HMRC will write to you in advance.
Q2. What types of income count toward the threshold?
Only self-employment and property income count. Employment income, dividends, and savings interest don’t.
Q3. Can I join early?
Yes — voluntary registration is available now if you want to familiarise yourself with the system.
Q4. Will this replace my Self Assessment tax return?
For business and property income, yes. You’ll still declare other types of income (like dividends or capital gains) within your MTD software.
Q5. What happens if I miss a quarterly deadline?
Each missed update earns a penalty “point”. Reach the limit, and you’ll face a financial fine. Points expire after a period of good compliance.
Q6. Do I have to pay tax quarterly?
No — quarterly updates are informational only. You’ll still pay tax by the usual deadlines.
Q7. I’m in a partnership — does this apply to me?
Not yet. Partnerships will be included later, but no start date is confirmed.
Q8. What Software Providers Should I Look At?
You’ll need to use HMRC-approved MTD-compatible software to file your quarterly updates. Here are some popular options suitable for self-employed individuals and small landlords:
| Software | Best For | Key Features | Notes |
|---|---|---|---|
| QuickBooks Online | Small businesses & sole traders | Easy to use, mobile app, automatic bank feeds | Strong support & MTD-ready |
| Xero | Freelancers & landlords with multiple properties | Clean interface, excellent automation | Scales well as you grow |
| FreeAgent | Small business owners (especially limited companies) | HMRC-integrated, simple dashboard | Free for NatWest/RBS/Mettle business account holders |
| Sage Accounting | Established small businesses | Strong reporting tools, payroll integration | Trusted brand, solid support |
| TaxCalc | Accountants & tax professionals | MTD bridging software for spreadsheets | Ideal if you prefer Excel record keeping |
| HMRC’s list of approved providers | Various | Find the full updated list at gov.uk | Updated regularly as new tools are added |
Our tip:
If you already use accounting software and are comfortable with it – stick with it.
How to Prepare Now
- Start keeping digital records — even before it’s mandatory.
- Choose suitable MTD-ready software (we can recommend the best fit for your business).
- Tidy up your bookkeeping — accurate data now means less stress later.
- Get professional help early — working with your accountant ensures a smooth transition.
Our Advice
Change is coming — but with the right preparation, it doesn’t need to be stressful.
At Pluto Accountancy, we’re already helping clients prepare for MTD for ITSA. Whether you’re a sole trader, freelancer, or landlord, we’ll make sure you’re ready for April 2026.
Contact us today to book your free MTD readiness chat.
office@plutoaccounts.com
01279 942161
Follow us on social media – @plutoaccountancy
Let’s make your move to digital tax simple and stress-free.