Making Tax Digital for Income Tax (MTD for ITSA) changes how sole traders and landlords keep records and report to HMRC. Instead of one self assessment return a year, you keep digital records and send quarterly updates through compatible software.
Who has to join, and when
It depends on your qualifying income: your total gross income from self-employment and property, before expenses.
- From 6 April 2026: qualifying income over £50,000 (based on your 2024/25 return).
- From 6 April 2027: qualifying income over £30,000.
- From 6 April 2028: qualifying income over £20,000.
Income from employment, dividends and partnerships does not count towards the threshold. Partnerships are not yet in scope.
What you have to do
- Keep digital records of each income and expense in MTD-compatible software, such as Xero, QuickBooks or Sage, or bridging software that links to spreadsheets.
- Send a quarterly update to HMRC within one month and seven days after each quarter. The quarters run to 5 July, 5 October, 5 January and 5 April (or calendar quarters if you choose).
- Finalise the year by 31 January after the tax year ends, adding other income, reliefs and adjustments. Payment dates do not change.
Penalties
MTD uses a points-based system for late submissions. Each late quarterly update earns a point, and a £200 penalty applies once you reach the threshold of four points for quarterly filers. Late payment penalties and interest apply separately.
How to get ready now
- Check your 2024/25 qualifying income to see which year you join.
- Choose software and move your bookkeeping onto it before your first quarter.
- Use a separate business bank account and connect it to your software with a bank feed.
- Agree who prepares each quarterly update and who reviews it, so nothing is missed.
How we help
We keep UK sole traders' and landlords' books in MTD-compatible software, prepare quarterly updates for review and submission, and deal with the year-end finalisation. See our bookkeeping services for UK businesses, or work out your take-home with our self-employed tax calculator.
Rules are as published by HMRC at the time of writing. Check your own position before acting.
