Best Making Tax Digital Software for UK Sole Traders and Landlords in 2026

Key information	Detail
MTD ITSA Start Date	April 2026 (for £50k+ income)
Who it Applies To	Sole traders & landlords
Key Requirement	Digital record keeping & quarterly updates

Introduction to Making Tax Digital for Income Tax Self Assessment (MTD ITSA)

The landscape of tax reporting for self-employed individuals and landlords in the UK is undergoing a significant transformation with HMRC's Making Tax Digital for Income Tax Self Assessment (MTD ITSA) initiative. From April 2026, MTD ITSA will become mandatory for sole traders and landlords with annual business or property income exceeding £50,000, extending to those earning over £30,000 from April 2027. This pivotal shift requires affected individuals to maintain digital records of their income and expenses and submit quarterly updates to HMRC using MTD-compatible software, replacing the traditional annual Self Assessment tax return.

The core objective of MTD ITSA is to modernise the tax system, reduce errors, and provide taxpayers with a more current view of their tax position throughout the year. For sole traders and landlords, this means moving away from paper-based accounting or simple spreadsheets to integrated digital solutions. Choosing the right MTD-compliant software is not merely about meeting a legal obligation; it is about embracing efficiency, improving accuracy, and gaining better control over your financial records. This comprehensive guide reviews the leading MTD software options available in 2026, offering insights into their features, suitability, and how they can help you navigate the new digital tax era with confidence.

What is Making Tax Digital for Income Tax Self Assessment (MTD ITSA)?

Making Tax Digital for Income Tax Self Assessment, or MTD ITSA, represents a fundamental change in how self-employed individuals and landlords report their income and expenses to HMRC. It is part of a broader government initiative to modernise the UK tax system, making it more efficient, effective, and easier for taxpayers to get their tax right. Instead of a single annual tax return, MTD ITSA mandates a more frequent, digital reporting process.

Key Components of MTD ITSA

• Digital Record Keeping: All business income and expenses must be recorded digitally using MTD-compatible software. This moves away from paper records, manual ledgers, or standalone spreadsheets, promoting greater accuracy and organisation.
• Quarterly Updates: Affected individuals must submit a summary of their business income and expenses to HMRC every three months. These are not full tax returns but provide HMRC with regular snapshots of financial activity.
• End of Period Statement (EOPS): After the final quarterly update for the tax year, an EOPS must be submitted. This allows for any accounting adjustments, such as capital allowances or accruals, to be made before the final tax calculation.
• Final Declaration: This replaces the traditional Self Assessment tax return. It consolidates all income sources, including those not covered by MTD ITSA (e.g., employment income), and calculates the final tax liability for the year.

MTD ITSA Timeline and Scope

The phased rollout of MTD ITSA means that not all sole traders and landlords will be affected simultaneously:

• April 2026: Mandatory for sole traders and landlords with annual business or property income exceeding £50,000.
• April 2027: Mandatory for sole traders and landlords with annual business or property income exceeding £30,000.
• HMRC has indicated that a decision on mandating MTD ITSA for those with income below £30,000 will be made at a later date. Voluntary sign-up is available for those below the thresholds.

Why MTD ITSA? HMRC aims to reduce errors in tax returns, which currently cost the exchequer billions annually. By requiring more frequent, digital submissions, MTD ITSA intends to give taxpayers a clearer, real-time view of their tax position, enabling them to better manage their finances and correct errors promptly. It also sets the foundation for a fully digital tax system.

Who Needs MTD ITSA Compliant Software in 2026?

Understanding if you fall within the scope of MTD ITSA is the first critical step. The mandate is income-based, targeting specific groups of self-employed individuals and landlords.

Income Thresholds and Start Dates

As of 2026, the primary group affected by MTD ITSA are those with qualifying income over £50,000. This threshold applies to the total gross income from all self-employment businesses and property income combined.

• From April 2026: If your total gross income from self-employment and/or property exceeds £50,000 in the previous tax year, you must comply with MTD ITSA.
• From April 2027: If your total gross income from self-employment and/or property exceeds £30,000 in the previous tax year, you must comply with MTD ITSA.

It is important to note that the income threshold is based on your total gross turnover, not your profit. If you have multiple sole trade businesses or several rental properties, all of their gross income is aggregated to determine if you meet the threshold.

Defining 'Sole Trader' and 'Landlord' for MTD ITSA

HMRC's definitions for MTD ITSA are broad:

• Sole Trader: Any individual who runs their own business as a self-employed person, whether full-time or part-time. This includes freelancers, contractors, consultants, tradespeople, and creative professionals. If you currently complete a Self Assessment tax return for your self-employment income, you are likely a sole trader for MTD purposes.
• Landlord: Individuals who receive income from letting out property, whether residential or commercial. This applies whether you own one property or a portfolio. If you currently declare rental income on your Self Assessment tax return, you are considered a landlord for MTD purposes.

Crucially, if you are both a sole trader and a landlord, your combined gross income from both activities will determine if you meet the MTD ITSA threshold. For example, if you earn £30,000 from your sole trade business and £25,000 from rental properties, your total income of £55,000 would bring you into MTD ITSA from April 2026.

Don't get caught out: Even if your income fluctuates, if it exceeded the threshold in the previous tax year, you are required to comply from the relevant start date. It's wise to start preparing well in advance of your mandatory start date to ensure a smooth transition.

Key Features of MTD-Compliant Software

Choosing MTD-compliant software is about more than just finding a tool that sends data to HMRC. It's about selecting a solution that genuinely simplifies your financial administration, ensures accuracy, and provides valuable insights. Here are the essential features to look for:

Ease of Use and User Interface

How intuitive is the software? Can a non-accountant easily navigate it, enter transactions, and understand reports? A clean, simple interface reduces errors and saves time, which is paramount for sole traders and landlords managing their own finances.

HMRC Compatibility and MTD Features

Is the software officially recognised by HMRC for MTD ITSA? Does it support digital record keeping, quarterly updates, End of Period Statements, and Final Declarations? Full compliance is non-negotiable.

Bank Feeds and Automation

Does it connect directly to your bank accounts? How well does it automate transaction categorisation and reconciliation? This is crucial for reducing manual data entry, saving hours of administrative work each quarter.

Cost and Value for Money

Does the pricing align with your budget and the features you need? Consider monthly fees, setup costs, and any additional charges for integrations or support. A balance between cost and functionality is key for small businesses.

Support and Resources

What kind of customer support is available (email, phone, chat)? Are there comprehensive help guides, tutorials, or community forums to assist with MTD queries? Reliable support can be invaluable when navigating new tax rules.

Scalability and Future Needs

Can the software grow with your business? If you plan to hire employees, become VAT registered, or expand your property portfolio, will the software still meet your needs without requiring a complete migration?

Receipt Capture and Document Storage

Does the software allow you to digitally capture and store receipts, either via a mobile app or email integration? This is vital for digital record keeping and audit trails, reducing paper clutter.

Reporting and Insights

Beyond MTD submissions, what kind of financial reports does the software generate? Can it provide useful insights into your business performance, cash flow, and profitability, aiding decision-making?

Beyond the Basics: Advanced Features for Efficiency

• Automated Bank Feeds and Reconciliation: This is arguably the most crucial feature. The software should connect directly to your business bank accounts, automatically importing transactions. Smart reconciliation tools then help categorise these transactions, significantly reducing manual data entry and potential errors. Look for robust bank feed reliability and intelligent categorisation suggestions.
• Digital Record Keeping and Receipt Capture: MTD requires digital records. Software should allow you to upload or snap photos of receipts, linking them directly to transactions. This creates a complete digital audit trail, eliminating the need for shoeboxes of paper receipts. Features like email forwarding for invoices can further streamline this.
• MTD ITSA Submission Functionality: The software must be HMRC-recognised for MTD ITSA. It should be capable of generating and submitting your quarterly updates, End of Period Statements, and Final Declarations directly to HMRC's MTD platform. A dashboard that clearly shows your submission status and upcoming deadlines is highly beneficial.
• Income and Expense Categorisation: Effective categorisation is vital for accurate reporting and identifying allowable expenses. Good software will offer pre-set categories, allow customisation, and even learn from your past categorisations to suggest future ones, saving time and ensuring consistency.
• Real-time Tax Estimates: A highly valuable feature, especially for MTD ITSA's quarterly reporting. Software that can provide an ongoing estimate of your tax liability as you record transactions allows for proactive tax planning and avoids year-end surprises.
• Reporting and Analytics: Beyond MTD submissions, the software should offer clear financial reports such as profit and loss statements, balance sheets, and cash flow reports. These insights are invaluable for understanding your business's health and making informed decisions.
• Support for Multiple Businesses/Properties: If you are both a sole trader and a landlord, or have multiple properties, the software should be able to manage these different income streams separately but consolidate them for your overall MTD ITSA obligations.
• Mobile App Functionality: For those on the go, a robust mobile app allows for instant receipt capture, transaction review, and even basic reporting from a smartphone or tablet.

Top MTD Software Options Reviewed for Sole Traders and Landlords in 2026

With MTD ITSA fast approaching, the market for compliant software is vibrant. Here, we review some of the leading options, highlighting their strengths and weaknesses for UK sole traders and landlords.

AccountsOS

Cloud-based accounting software designed for small businesses and self-employed individuals, with a strong focus on automation and user-friendliness, fully compliant with MTD ITSA requirements.

Key MTD ITSA Features

• Automated bank feeds and transaction categorisation
• Real-time MTD ITSA dashboard for compliance tracking
• One-click quarterly updates to HMRC
• Integrated EOPS and Final Declaration preparation
• Receipt capture and digital document storage
• Dedicated support for MTD queries

Pros for Sole Traders/Landlords

• Specifically designed for UK sole traders and landlords
• Highly intuitive interface, ideal for non-accountants
• Competitive pricing with robust features
• Excellent customer support and MTD guidance
• Comprehensive automation reduces manual data entry and errors
• Real-time tax estimates to aid financial planning

Cons for Sole Traders/Landlords

• Newer to the market compared to established players, though rapidly gaining traction
• May not have the extensive third-party integrations of larger platforms (though core integrations are covered)

Pricing: Starts from £12/month, with a comprehensive free trial available.

Xero

Popular cloud accounting software offering a comprehensive suite of tools for small to medium-sized businesses, including MTD compliance features.

Key MTD ITSA Features

• HMRC-recognised MTD software
• Bank feeds and reconciliation
• Expense tracking and categorisation
• Reporting for MTD ITSA submissions (via bridging or direct)
• Integration with many third-party apps

Pros for Sole Traders/Landlords

• User-friendly interface and aesthetically pleasing design
• Extensive ecosystem of integrations, suitable for growing businesses
• Strong mobile app for on-the-go management
• Robust features for invoicing and payroll (if needed later)

Cons for Sole Traders/Landlords

• Can be more expensive for basic sole trader needs, especially if higher-tier plans are required for full MTD ITSA features
• Some features may be overkill for very simple businesses or landlords with minimal transactions
• Requires some setup to be fully MTD-compliant for ITSA if not using an accountant, potentially needing professional guidance

Pricing: Starts from £15/month (Starter plan, may need higher for full MTD ITSA features).

Sage Accounting

A long-standing provider of accounting software, Sage offers various packages, including cloud-based solutions tailored for small businesses and MTD ITSA.

Key MTD ITSA Features

• HMRC-recognised for MTD
• Automated bank connections and reconciliation
• Invoice and expense management
• MTD ITSA reporting functionality and submission
• Cash flow forecasting

Pros for Sole Traders/Landlords

• Reputable brand with extensive support resources and training materials
• Scalable for businesses with employees, inventory, or more complex needs
• Good for those familiar with traditional accounting software or wanting a comprehensive solution
• Reliable and secure platform

Cons for Sole Traders/Landlords

• Interface can feel less modern or intuitive compared to some newer cloud competitors
• Pricing can become complex with add-ons for additional features or users
• May have a steeper learning curve for complete beginners or those unfamiliar with accounting principles
• Support can sometimes be tiered based on subscription level

Pricing: Starts from £14/month (Accounting Start plan, check for full MTD ITSA features).

QuickBooks Self-Employed

Designed specifically for sole traders, freelancers, and landlords, offering simplified income and expense tracking with MTD ITSA capabilities.

Key MTD ITSA Features

• HMRC-recognised MTD ITSA software
• Tracks income and expenses separately from personal finances
• Automated mileage tracking and receipt capture
• Quarterly reporting and annual submission features tailored for self-assessment
• Direct bank account connection

Pros for Sole Traders/Landlords

• Tailored specifically for self-employed individuals and landlords, simplifying tax obligations
• Easy to separate business and personal transactions, a common pain point for sole traders
• Good value for money for basic MTD ITSA compliance needs
• Strong mobile app for on-the-go tracking and receipt scanning
• User-friendly dashboard providing a clear overview of finances

Cons for Sole Traders/Landlords

• Limited features for businesses with employees, VAT registration, or more complex accounting requirements
• Can be restrictive if your business grows beyond sole trader status and requires more advanced functionality
• Interface can sometimes be clunky or overwhelming with too many features for a 'self-employed' tool

Pricing: Starts from £10/month (Self-Employed plan).

FreeAgent

Cloud accounting software popular with freelancers, contractors, and small businesses, known for its user-friendly interface and comprehensive features, often included free with NatWest/RBS business accounts.

Key MTD ITSA Features

• HMRC-recognised MTD software
• Bank feeds and reconciliation
• Automatic MTD ITSA reporting and submission
• Invoice creation and expense management
• Project management and time tracking features

Pros for Sole Traders/Landlords

• Very intuitive and easy to use, with a focus on simplicity
• Excellent for project-based work, time tracking, and invoicing contractors
• Often free with certain business bank accounts (e.g., NatWest, RBS, Ulster Bank), offering significant savings
• Good customer support and a comprehensive knowledge base
• Clear dashboard with insights relevant to small businesses

Cons for Sole Traders/Landlords

• Can be more expensive if not bundled with a bank account, making it less competitive on price for standalone users
• Some advanced features for larger businesses or complex inventory management are less developed than competitors
• May be slightly overkill for landlords with very simple income/expenses, but still highly functional

Pricing: Starts from £19/month (or free with NatWest/RBS business accounts).

How to Choose the Best MTD Software for Your Needs

With several strong contenders in the market, selecting the ideal MTD ITSA software requires careful consideration of your specific circumstances. Here's a deeper dive into the selection criteria:

Ease of Use and User Interface

How intuitive is the software? Can a non-accountant easily navigate it, enter transactions, and understand reports? A clean, simple interface reduces errors and saves time, which is paramount for sole traders and landlords managing their own finances.

HMRC Compatibility and MTD Features

Is the software officially recognised by HMRC for MTD ITSA? Does it support digital record keeping, quarterly updates, End of Period Statements, and Final Declarations? Full compliance is non-negotiable.

Bank Feeds and Automation

Does it connect directly to your bank accounts? How well does it automate transaction categorisation and reconciliation? This is crucial for reducing manual data entry, saving hours of administrative work each quarter.

Cost and Value for Money

Does the pricing align with your budget and the features you need? Consider monthly fees, setup costs, and any additional charges for integrations or support. A balance between cost and functionality is key for small businesses.

Support and Resources

What kind of customer support is available (email, phone, chat)? Are there comprehensive help guides, tutorials, or community forums to assist with MTD queries? Reliable support can be invaluable when navigating new tax rules.

Scalability and Future Needs

Can the software grow with your business? If you plan to hire employees, become VAT registered, or expand your property portfolio, will the software still meet your needs without requiring a complete migration?

Receipt Capture and Document Storage

Does the software allow you to digitally capture and store receipts, either via a mobile app or email integration? This is vital for digital record keeping and audit trails, reducing paper clutter.

Reporting and Insights

Beyond MTD submissions, what kind of financial reports does the software generate? Can it provide useful insights into your business performance, cash flow, and profitability, aiding decision-making?

Practical Steps for Selection

• Assess Your Current Accounting Practices: Are you currently using spreadsheets, paper, or another basic system? Understand your starting point to gauge the learning curve for new software. If you're completely new to digital accounting, ease of use should be a top priority.
• Define Your Specific Needs:
  • How many income streams do you have (e.g., one sole trade, multiple properties)?
  • What is your average monthly transaction volume?
  • Do you need invoicing capabilities, or just expense tracking?
  • Do you work with an accountant, and if so, do they have preferred software?
  • Are you comfortable with technology, or do you prefer a very simple, guided interface?
• Take Advantage of Free Trials: Most leading software providers offer free trials. Use these to test the user interface, bank feed functionality, receipt capture, and reporting features. See if you can comfortably complete a few typical transactions and generate a basic report.
• Consider Support and Training: MTD ITSA is new for many. Look for providers with strong customer support, comprehensive help guides, and online tutorials. Access to MTD-specific resources can be invaluable.
• Read Reviews and Get Recommendations: While this guide provides an overview, individual experiences can vary. Look at independent reviews from other sole traders and landlords, and ask for recommendations from peers or your accountant.

Getting Started with MTD ITSA: A Step-by-Step Guide

Once you've chosen your MTD-compliant software, the next step is to prepare for and implement MTD ITSA. This process involves several key stages to ensure you meet HMRC's requirements.

Step 1: Confirm Your Eligibility and Start Date

• Review your gross income from all self-employment and property sources for the previous tax year (e.g., 2025/2026 for an April 2026 start).
• If your combined income exceeds the £50,000 threshold, you are mandated to join MTD ITSA from April 2026. If it exceeds £30,000 for the 2026/2027 tax year, you will join from April 2027.

Step 2: Choose Your MTD-Compatible Software

• Based on your needs, budget, and desired features, select an HMRC-recognised software package. AccountsOS, Xero, Sage, QuickBooks, and FreeAgent are all strong contenders.
• Ensure the software specifically supports MTD ITSA, not just MTD for VAT.

Step 3: Sign Up for MTD ITSA

• You must sign up for MTD ITSA through HMRC's website. You will need your Government Gateway user ID and password.
• Do not sign up too early, as it can affect your ability to file your last Self Assessment return. HMRC generally advises signing up after you've filed your final Self Assessment for the tax year immediately preceding your MTD start date.

Step 4: Connect Your Bank Accounts and Import Data

• Once your software is set up, connect your business bank accounts for automated transaction feeds.
• Import any historical data you need for the new tax year. Most software allows you to import transactions from a spreadsheet if you have them.
• Begin categorising your income and expenses as they come in. Take advantage of automated categorisation rules.

Step 5: Implement Digital Record Keeping

• For every business transaction, ensure you have a digital record. This means scanning physical receipts, saving digital invoices, and linking them to your categorised transactions in your software.
• Regularly review your records for accuracy and completeness.

Step 6: Submit Quarterly Updates

• At the end of each tax quarter, your software will compile a summary of your income and expenses.
• Review this summary carefully. Once satisfied, submit it directly to HMRC through your software.
• The deadlines for quarterly updates are:
  • Quarter 1 (6 April to 5 July): Due by 5 August
  • Quarter 2 (6 July to 5 October): Due by 5 November
  • Quarter 3 (6 October to 5 January): Due by 5 February
  • Quarter 4 (6 January to 5 April): Due by 5 May

Step 7: Prepare and Submit Your End of Period Statement (EOPS) and Final Declaration

• After your final quarterly update, your software will guide you through preparing your EOPS, where you can make any necessary accounting adjustments.
• Finally, you will complete your Final Declaration, which consolidates all income and finalises your tax liability. This must be submitted by 31 January following the tax year.

Common MTD ITSA Challenges and Solutions

While MTD ITSA aims to simplify tax, it introduces new requirements that can present challenges for some sole traders and landlords. Anticipating these issues and knowing how to address them can ensure a smoother transition.

Challenge 1: Digital Literacy and Technology Adoption

• Issue: Some individuals may not be comfortable with digital tools or feel overwhelmed by new software.
• Solution: Choose software known for its user-friendliness and intuitive interface, such as AccountsOS or FreeAgent. Utilise free trials to test ease of use. Seek out online tutorials, webinars, or even local workshops. Many providers offer extensive support documentation and dedicated customer service.

Challenge 2: Multiple Income Sources or Complex Business Structures

• Issue: Managing income from a sole trade, multiple rental properties, or other sources within a single MTD system can be complex.
• Solution: Ensure your chosen software can handle multiple 'businesses' or income streams within one account. AccountsOS, Xero, and Sage are generally well-equipped for this. Clearly tag transactions to the correct income source. If complexity is high, consider consulting an MTD-savvy accountant who can help set up your software correctly.

Challenge 3: Transitioning from Manual or Spreadsheet Records

• Issue: Moving existing historical data into new software and adapting to digital record keeping can be daunting.
• Solution: Plan for the transition period. Start by running your old and new systems in parallel for a short time if possible. Most software offers data import tools. Focus on getting the new tax year's data accurately entered from day one. Gradually digitise any necessary historical records.

Challenge 4: Keeping Up with Quarterly Submissions

• Issue: The shift from annual to quarterly reporting can be a significant change, leading to missed deadlines.
• Solution: Select software with strong reminder features and a clear MTD dashboard. Make a habit of regularly updating your records, ideally weekly or monthly, rather than leaving it all until the quarter-end. Automated bank feeds and categorisation are vital here to minimise effort.

Challenge 5: Understanding Allowable Expenses and Tax Rules

• Issue: Correctly identifying and categorising allowable expenses can be confusing, especially with new rules or specific property income deductions.
• Solution: Use software that offers clear guidance on expense categories. AccountsOS, for example, is designed to simplify this. Refer to HMRC guidance for specific rules, and if in doubt, consult your accountant. Regular review of your categorised expenses can help catch errors early.

The Role of Your Accountant in the MTD ITSA Era

Making Tax Digital ITSA does not eliminate the need for an accountant; in fact, their role becomes even more crucial. While MTD software automates many tasks, an accountant can provide invaluable expertise and support.

• Software Setup and Migration: Accountants can assist with selecting the right software, setting it up correctly, and migrating any existing data.
• Review and Submission: Many sole traders and landlords will continue to use their accountant to review quarterly updates, End of Period Statements, and the Final Declaration before submission to HMRC, ensuring accuracy and compliance.
• Tax Planning and Advice: With real-time data available through MTD software, accountants can offer more proactive tax planning advice throughout the year, helping you optimise your tax position.
• Complex Tax Situations: For more intricate tax scenarios, such as partial exemptions, capital allowances, or specific property tax rules, an accountant's expertise is indispensable.
• Error Correction: If errors are identified, an accountant can guide you through the process of correcting them with HMRC.

Many MTD-compatible software solutions, including AccountsOS, offer features for inviting your accountant to access your records, facilitating seamless collaboration. This partnership can significantly ease your MTD ITSA journey.

Beyond Compliance: The Benefits of Using MTD Software

While MTD ITSA is a mandatory change, the right software offers benefits far beyond mere compliance. Embracing digital accounting can transform how you manage your finances.

• Reduced Errors: Automation and digital record keeping minimise manual data entry, significantly reducing the chance of human error in your tax submissions.
• Time Savings: Automated bank feeds, categorisation, and one-click submissions free up hours previously spent on manual bookkeeping, allowing you to focus more on your business or properties.
• Real-time Financial Insights: With up-to-date records, you gain a clearer, real-time understanding of your income, expenses, and profitability. This empowers better financial decision-making.
• Proactive Tax Planning: Knowing your estimated tax liability throughout the year enables you to budget effectively, set aside funds, and potentially take advantage of tax-saving opportunities.
• Improved Cash Flow Management: By regularly monitoring your income and outgoings, you can better manage your cash flow, identifying potential issues before they become critical.
• Enhanced Organisation: Digital storage of receipts and invoices creates a tidy, accessible audit trail, making it easy to retrieve documents if ever needed by HMRC.
• Peace of Mind: Knowing you are MTD ITSA compliant and have accurate, up-to-date records provides significant peace of mind, reducing stress around tax deadlines.

Penalties for MTD ITSA Non-Compliance

HMRC has introduced a new penalties system for MTD ITSA, designed to encourage compliance with the new digital reporting requirements. It's crucial to understand these to avoid unnecessary fines.

Scenario	Penalty
Late quarterly submission	Points-based system, leading to fines
Late End of Period Statement	Points-based system, leading to fines
Late Final Declaration	Points-based system, leading to fines
Failure to keep digital records	Penalty up to £400 for initial failure, then daily penalties
Inaccurate returns (careless error)	Penalty up to 30% of the extra tax due
Inaccurate returns (deliberate error)	Penalty up to 100% of the extra tax due

Points-based system: For late submissions (quarterly updates, EOPS, Final Declaration), HMRC operates a points-based system. Each missed deadline earns a point. Once a certain threshold of points is reached (e.g., 4 points for annual submissions), a financial penalty is issued (£200). Points expire after a compliance period, but repeated failures lead to escalating penalties.

Worked Examples: MTD ITSA in Practice

Let's illustrate how MTD ITSA would work for typical sole traders and landlords using compliant software.

Example 1: Freelance Graphic Designer (Sole Trader)

Sarah is a freelance graphic designer. Her gross income for the 2025/2026 tax year was £65,000. She will be mandated for MTD ITSA from April 2026. She chooses AccountsOS for its ease of use and automation.

• Setup: Sarah connects her business bank account to AccountsOS. She sets up categories for her income (design fees) and expenses (software subscriptions, marketing, office supplies, travel).
• Ongoing: As she receives payments and makes purchases, transactions automatically feed into AccountsOS. She quickly categorises them, and for larger expenses, she uploads a receipt photo through AccountsOS in her mobile browser. The native Finn app is coming soon for iOS and Android.
• Quarterly Update (April-July): By 5 August, AccountsOS generates a summary report: £16,000 income, £3,000 expenses. Sarah reviews it, makes sure all transactions are categorised, and with a single click, submits the summary to HMRC. AccountsOS also shows her estimated tax for the quarter.
• Throughout the Year: She repeats this process for the subsequent quarters, always having a clear view of her income, expenses, and estimated tax liability.
• Year-End: After her final quarterly update (January-April), AccountsOS helps her prepare her End of Period Statement, where she adds a capital allowance for a new computer. Finally, she submits her Final Declaration, consolidating all her MTD data and any other personal income, by 31 January 2027.

Example 2: Buy-to-Let Landlord with Multiple Properties

David owns three buy-to-let properties. His total rental income for 2025/2026 was £72,000. He will also be mandated for MTD ITSA from April 2026. He opts for Xero due to its robust features and accountant integration.

• Setup: David creates separate 'tracking categories' in Xero for each property. He connects his dedicated property bank account.
• Ongoing: Rental income and property expenses (repairs, agent fees, mortgage interest, insurance) feed into Xero. David categorises each transaction and assigns it to the correct property. He uploads invoices from contractors directly to Xero.
• Quarterly Update (April-July): By 5 August, Xero compiles the income and expenses for all three properties. David's accountant reviews the data remotely, ensuring all allowable expenses are captured. David then submits the consolidated summary to HMRC via Xero.
• Throughout the Year: This quarterly rhythm continues. David's accountant uses Xero's reporting to monitor profitability per property.
• Year-End: David's accountant handles the EOPS, calculating any wear and tear allowance or other property-specific adjustments. The Final Declaration is then prepared and submitted, combining his property income with any other personal income sources.

How AccountsOS Simplifies Making Tax Digital for You

AccountsOS is specifically designed to make MTD ITSA compliance straightforward and stress-free for UK sole traders and landlords.

HMRC-Recognised Software

AccountsOS is fully compliant and recognised by HMRC for MTD ITSA, ensuring your submissions meet all legal requirements and providing peace of mind.

Automated Digital Records

Connect your bank accounts for automatic transaction imports and smart categorisation, making digital record keeping effortless and accurate.

One-Click Quarterly Updates

Generate and submit your quarterly income and expense summaries directly to HMRC with minimal effort, saving you time and reducing stress.

EOPS & Final Declaration Ready

AccountsOS helps prepare your End of Period Statement and Final Declaration, streamlining your annual tax duties and ensuring comprehensive compliance.

Real-Time Tax Estimates

See your estimated tax liability update throughout the year, helping you budget, plan your finances, and avoid any unexpected tax bills.

Dedicated MTD Support

Our expert team is on hand to answer your MTD ITSA questions and guide you through the process, offering unparalleled support.

Frequently asked questions

What is Making Tax Digital for Income Tax Self Assessment (MTD ITSA)?

MTD ITSA is a government initiative requiring most self-employed individuals and landlords to keep digital records of their income and expenses and send quarterly summaries to HMRC using MTD-compatible software. It aims to make tax administration more efficient and reduce errors by moving away from annual self-assessment.

When does MTD ITSA apply to sole traders and landlords?

MTD ITSA will apply from April 2026 for those with annual business or property income over £50,000. From April 2027, it will extend to those with income over £30,000. It's crucial for individuals to check their specific income threshold and prepare in advance.

What kind of digital records do I need to keep?

You must keep digital records of all your business income and expenses. This includes details of sales, purchases, bank transactions, and any other financial movements related to your self-employment or property business. These records must be stored digitally within MTD-compatible software.

Can I use spreadsheets for MTD ITSA?

While you can use spreadsheets to record transactions, they must be combined with 'bridging software' that can extract the data and send it to HMRC in the MTD-compliant format. Most users find dedicated MTD accounting software more efficient and less prone to errors than a spreadsheet-plus-bridging solution.

What are quarterly updates?

Quarterly updates are summaries of your business income and expenses that you submit to HMRC every three months. These are not full tax returns, but rather regular snapshots of your financial activity, providing HMRC with a more current view of your tax position.

Do I still need to file a Self Assessment tax return?

No, MTD ITSA replaces the traditional annual Self Assessment tax return for income tax purposes for those mandated to join. Instead, you will submit quarterly updates, an End of Period Statement (EOPS), and a Final Declaration, all through MTD-compatible software.

What if I have multiple income sources, like a sole trade and property income?

If you have multiple businesses or property portfolios, you will need to keep digital records and submit separate quarterly updates for each. Your MTD software should be able to manage these different income streams and consolidate them for the End of Period Statement and Final Declaration.

Is MTD ITSA mandatory for all sole traders and landlords?

It is mandatory for those with qualifying business or property income above the specified thresholds (£50,000 from April 2026, £30,000 from April 2027). If your income falls below these thresholds, you are not currently required to join MTD ITSA, but you can choose to do so voluntarily for its benefits.

Related guides

• MTD ITSA Guide for Small Businesses
• Understanding Allowable Expenses
• HMRC Tax Deadlines
• Getting Started with AccountsOS