Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is HMRC's mandatory regime requiring sole traders and landlords with qualifying income above £50,000 to keep digital records and submit quarterly updates through compatible software. It went live on 6 April 2026 and replaces the annual paper-and-spreadsheet rhythm with four in-year submissions plus a Final Declaration.
What is MTD ITSA, in plain English?
Forget the marketing fluff for a second. MTD ITSA is HMRC's attempt to drag self-employed tax compliance into the same digital pipework that VAT-registered businesses have been using since 2019. If you're a sole trader, a landlord, or both, and your combined gross turnover from those activities crossed £50,000 in the 2024/25 tax year, you're now in scope. You keep your books in approved software, the software talks to HMRC's API, and four times a year you click submit on a quarterly summary of income and expenses.
It is not — repeat, not — a new tax. The amount you owe doesn't change. What changes is the cadence and the medium. Pen-and-paper or a single annual login to the Self Assessment portal won't cut it any longer. HMRC wants the data in something it can read live, every three months.
Who is actually affected from April 2026?
HMRC's own briefing pegs the first wave at around 780,000 taxpayers. That figure includes anyone whose qualifying income — that's gross turnover from self-employment plus gross rental income, before expenses — exceeded £50,000 in the reference tax year. The two streams are added together. A landlord with £35,000 of rent and a side consultancy turning over £20,000 is in. A sole trader pulling £49,500 with no rental income is out. For now.
The phasing matters because the threshold drops fast:
| From | Income threshold | Approx. people affected |
|---|---|---|
| 6 April 2026 | Over £50,000 | 780,000 |
| 6 April 2027 | Over £30,000 | +970,000 |
| 6 April 2028 | Over £20,000 | +further cohort |
If you sit between £30,000 and £50,000 today, you've got roughly 11 months left of the old system before MTD swallows you too. Anyone earning under £20,000 from self-employment or rentals stays on annual Self Assessment for the foreseeable.
Key 2026 dates you cannot ignore
The first thing accountants kept getting wrong in client emails this spring was the deadline. The launch date — 6 April 2026 — is when the digital record-keeping obligation kicks in. The first submission deadline is 7 August 2026, covering the quarter ending 5 July. Mark it now. If you fall behind on Q1 it's all downhill.
| Period covered | Submission deadline |
|---|---|
| 6 April – 5 July 2026 (Q1) | 7 August 2026 |
| 6 July – 5 October 2026 (Q2) | 7 November 2026 |
| 6 October 2026 – 5 January 2027 (Q3) | 7 February 2027 |
| 6 January – 5 April 2027 (Q4) | 7 May 2027 |
| Final Declaration 2026/27 | 31 January 2028 |
You can elect calendar-quarter ends instead (30 June, 30 September etc.) which buys an extra few days but the submission deadline still falls on the seventh of the second following month. Most sole traders are sticking with tax-year quarters because the maths is simpler at year-end.
Software requirements: the part nobody likes
HMRC doesn't supply the software. You buy it, or rent it monthly, from a recognised provider. The shortlist most accountants are recommending right now is FreeAgent, Xero, QuickBooks, Sage and FreshBooks — though dozens of smaller bridging tools also exist. We've put together a full MTD ITSA software comparison covering price, included features and which platforms suit landlords versus sole traders.
The minimum requirement is that the software can: keep your digital records in a structured format, calculate quarterly totals, submit them through HMRC's API, and produce the year-end Final Declaration. Spreadsheets are technically allowed but only if paired with bridging software — and the friction is rarely worth the saving.
How to register for MTD ITSA
Registration isn't automatic. HMRC won't sign you up because your last return crossed the threshold. You have to push the button yourself, ideally before your software starts pulling submissions. The sign-up flow lives at gov.uk/guidance/sign-up-your-business-for-making-tax-digital-for-income-tax.
- Gather your Government Gateway user ID and password (the same one you use for Self Assessment).
- Have your National Insurance number, accounting period start date, and business type to hand.
- Pick whether you'll use the agent route (your accountant submits) or self-serve.
- Choose your software provider before signing up — HMRC asks which one you'll use.
- Connect the software to your HMRC account via OAuth. Most platforms walk you through this in under five minutes.
Done it? Good. Now the boring rhythm starts.
The quarterly submissions process, demystified
Quarterly updates are summaries, not full returns. You submit total income and total expenses for the period, broken down by category. Categories follow the existing SA103 (self-employment) and SA105 (property) structure: turnover, cost of goods sold, motor expenses, premises costs, repairs, admin, finance charges, and so on for trading income; rents received, repairs, agent fees, finance costs, allowable expenses for property.
A few things to keep in mind that aren't obvious from the HMRC marketing:
- Quarterly updates are not tax payments. You still pay your tax on 31 January and 31 July under the existing Payment on Account schedule.
- Figures are cumulative within the year. Q2 is Q1+Q2, not Q2 alone. Software handles this automatically but if you switch providers mid-year you'll feel the pain.
- You can amend a previous quarter's update at any point until the Final Declaration is submitted. Mistakes aren't fatal.
- Standalone quarterly updates do not require accruals accounting. Cash basis is the default and probably what you want unless your turnover is well into six figures.
For a step-by-step walkthrough of the actual submission flow, see our guide to submitting quarterly updates to HMRC. Sole traders specifically should also look at the sole trader compliance walkthrough; landlords have their own guide because the property categories work differently.
Penalties: the points-based regime
This bit is gentler than the headlines suggested when MTD was first announced, but don't relax too much. HMRC has moved to a points-based system for late submissions. You accumulate one point for each missed quarterly deadline; hit four points and you cop a £200 penalty. After that, every further missed deadline is another £200. Points expire after 24 months of clean compliance.
HMRC has also confirmed a soft-landing period for the 2026/27 tax year only. No penalty points will be issued for late quarterly updates during this first year. So if you blow Q1 because your software wasn't set up — annoying, but not financially fatal. The reprieve does not apply to late payment: interest still runs from the statutory due date, which remains 31 January.
What happens if your income drops below £50,000?
Once you're in MTD ITSA, you stay in for at least three full tax years even if turnover dips. HMRC built this rule deliberately to stop people gaming the threshold. After three years below the line you can apply to leave, but you'll need to demonstrate that the drop is durable, not seasonal.
Exemptions that actually exist
Genuine exemptions are narrow. They cover digital exclusion (no internet access plausibly available), religious objection to electronic communication, and severe disability that makes digital record-keeping impractical. Age alone is not grounds. Living rurally is not grounds. Hating computers is, sadly, not grounds. The application form lives on gov.uk and HMRC is reviewing each request individually — expect a response in eight to twelve weeks.
Costs you should budget for in year one
| Item | Annual cost (typical) |
|---|---|
| MTD-compatible software | £90 – £350 |
| Accountant top-up for transition | £200 – £600 one-off |
| Time investment (your own hours) | 15 – 40 hours year one |
| Bookkeeping clean-up if records are messy | £0 – £500 |
The main cost isn't the software. It's the discipline shift. If you've been doing your books in March every year for ten years, switching to a four-times-a-year cadence feels like being put on a treadmill. The flip side: by January 2028, your Final Declaration is largely a formality because the data is already submitted.
Common pitfalls in the first three weeks
Three weeks in, accountants are already flagging the same handful of issues:
- People signing up before connecting their software, then finding the OAuth link fails because the provider isn't whitelisted under their user account.
- Mixing personal and business transactions in a single bank account — MTD doesn't ban this but it makes quarterly categorisation a nightmare.
- Forgetting that Class 4 NICs are still calculated annually, not quarterly. Your software shows running profit; your tax bill calculation only finalises at year-end.
- Landlords with jointly-owned property assuming one spouse can submit for both. They can't. Each owner submits their share separately.
Should you start now if you're under the threshold?
Voluntary sign-up has been open since April 2024. There's a respectable argument for getting in early if you expect to cross £50,000 within two years — the muscle memory matters and the soft-landing period only protects 2026/27 entrants. That said, there's no prize for over-engineering compliance you don't legally owe. If you're sitting comfortably at £25,000 and stable, leave it.
The bottom line
MTD ITSA is here, the first deadline is fourteen weeks away, and the population most affected — small landlords and sole traders who've never touched accounting software — is also the least prepared. If that's you and you haven't picked software yet, that's the priority for this weekend. Everything else can wait until July.