# Do You Need Making Tax Digital for Income Tax in 2026? Full Guide for Sole Traders & Landlords

Last updated: 14 October 2026

From April 2026, self-employed individuals and landlords earning above £50,000 must comply with Making Tax Digital for Income Tax Self Assessment (MTD ITSA). This means keeping digital records and submitting quarterly updates to HMRC instead of one annual return.

- **Start date:** April 2026
- **Income threshold:** £50,000+
- **Reporting frequency:** Quarterly

[View HMRC Guidance](https://www.gov.uk/guidance/making-tax-digital-for-income-tax)

Making Tax Digital for Income Tax Self Assessment, commonly referred to as MTD ITSA, represents a significant evolution in the UK's tax system. Designed to modernise tax administration and make it more efficient, MTD ITSA mandates a shift from annual self-assessment returns to a system of digital record keeping and regular, quarterly updates to HMRC. This change aims to reduce errors, provide taxpayers with a clearer, more real-time view of their tax position, and streamline the interaction between businesses, landlords, and the tax authority.

The phased rollout begins in April 2026, initially impacting self-employed individuals and landlords with gross income exceeding £50,000. Understanding the requirements, deadlines, and implications of MTD ITSA is crucial for affected taxpayers to ensure compliance and avoid potential penalties. This comprehensive guide provides sole traders and landlords with the essential information needed to navigate this transition effectively.

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

Making Tax Digital (MTD) is a government initiative to make tax administration more effective, more efficient and easier for taxpayers to get their tax right. MTD ITSA is the specific iteration of this initiative for Income Tax Self Assessment. It transforms the way self-employed individuals and landlords report their income and expenses to HMRC.

Historically, sole traders and landlords would compile all their financial information once a year to submit a single Self Assessment tax return. MTD ITSA replaces this annual process with a more frequent, digital approach. The core principle is that relevant taxpayers must maintain digital records of their business income and expenses and use MTD-compatible software to send summary updates to HMRC every three months.

This digital framework is intended to provide HMRC with more up-to-date information, reducing the opportunity for errors and making it easier for taxpayers to manage their affairs throughout the year. For businesses and landlords, it means a shift towards continuous digital record keeping, moving away from a year-end scramble to gather financial documents.

### Key Components of MTD ITSA

- Keep digital records of all business income and expenses
- Use MTD-compatible software to maintain these records
- Send quarterly income and expense summaries to HMRC
- Submit an End of Period Statement (EOPS) after the tax year
- Make a final declaration, similar to the current Self Assessment

The transition to MTD ITSA signifies a move towards a more integrated and real-time tax system, where financial data is consistently tracked and reported digitally. This necessitates a proactive approach to record keeping and the adoption of suitable software solutions.

## Who Needs to Comply with MTD ITSA?

MTD ITSA is being introduced in phases, based on a taxpayer's gross income from their self-employment and property businesses. It is crucial to understand these thresholds and how your income is assessed to determine if and when you need to comply.

### Income Thresholds and Start Dates

| Income | Start date | Applies to |
| --- | --- | --- |
| Above £50,000 | From April 2026 | Self-employed individuals and landlords |
| Above £30,000 | From April 2027 | Self-employed individuals and landlords |
| General Partnerships | TBC (after April 2027) | Most general partnerships |

For the initial phase starting April 2026, the key figure to consider is your total gross income from self-employment and property income that exceeds £50,000.

### Calculating Your Gross Income for MTD ITSA

The gross income threshold is calculated based on your total income from:

- All self-employment businesses you operate.
- All UK and overseas property businesses you own.

This is your income before any deductions for expenses or reliefs are applied. It is the "top line" figure. HMRC will typically use your total gross income from the previous tax year to determine if you meet the threshold for the upcoming MTD ITSA period.

**Example: Gross Income Calculation.** Sarah is a freelance graphic designer (sole trader) and also owns a buy-to-let property. In the 2025-26 tax year, her gross income from graphic design was £40,000. Her gross rental income from her property was £15,000. Her total gross income is £40,000 + £15,000 = £55,000. Since £55,000 is above the £50,000 threshold, Sarah will be mandated to join MTD ITSA from April 2026.

### What if My Income Changes?

Once you are mandated into MTD ITSA, you generally remain in the system, even if your gross income falls below the threshold in a later tax year. However, if your income consistently falls below the threshold, it is advisable to check HMRC guidance or consult with an accountant regarding potential options to exit the MTD regime.

Conversely, if your gross income rises above the threshold in a tax year, you will be required to join MTD ITSA from the start of the next tax year. For example, if your income exceeds £50,000 in the 2026-27 tax year, you would need to comply from April 2027.

### Specific Scenarios

- **Multiple Businesses or Properties:** If you operate multiple sole-trader businesses or own several properties, the gross income from all these activities is aggregated to determine if you meet the threshold. You will then need to submit separate quarterly updates for each business.
- **Partnerships:** General partnerships will be brought into MTD ITSA at a later stage, expected after April 2027. The specific rules and thresholds for partnerships will be published by HMRC in due course. Limited companies are already subject to Making Tax Digital for Corporation Tax, if they are VAT registered, but MTD ITSA does not directly affect their Corporation Tax obligations.
- **Jointly Owned Properties:** For jointly owned properties, each owner's share of the gross rental income is taken into account when calculating their individual gross income for MTD ITSA purposes.

It is important to regularly review your gross income to anticipate when you might be brought into the MTD ITSA regime and to prepare accordingly.

## When Does MTD ITSA Start? Key Dates to Remember

The implementation of MTD ITSA is a phased approach, ensuring that businesses and landlords have time to adapt to the new digital requirements. The key dates are critical for planning your transition.

| Date | What happens |
| --- | --- |
| April 2026 | MTD ITSA begins for self-employed individuals and landlords with gross income over £50,000. |
| April 2027 | MTD ITSA begins for self-employed individuals and landlords with gross income over £30,000. |
| After April 2027 | MTD ITSA is expected to extend to most general partnerships, with a specific date to be announced. |

### Understanding the Phased Rollout

- **April 2026:** This marks the mandatory start date for sole traders and landlords whose gross income from self-employment and/or property exceeds £50,000 in the previous tax year. For example, if your gross income was above £50,000 in the 2024-25 tax year, you will need to comply from the start of the 2026-27 tax year (6 April 2026).
- **April 2027:** The second phase extends the mandate to those with gross income above £30,000. If your gross income was between £30,001 and £50,000 in the 2025-26 tax year, you will be required to join MTD ITSA from the start of the 2027-28 tax year (6 April 2027).
- **General Partnerships:** While a definitive date is yet to be announced, general partnerships are expected to follow the individual rollout, likely after April 2027. HMRC will provide further guidance on this in due course.

It is important to note that you can choose to join MTD ITSA voluntarily even if you do not meet the mandated thresholds. This allows businesses and landlords to familiarise themselves with the digital process and potentially benefit from the real-time insights MTD provides.

## Core Requirements of MTD ITSA: What You Need to Do

Complying with MTD ITSA involves several fundamental changes to how you manage and report your financial information. These core requirements form the backbone of the new digital tax system.

### 1. Digital Record Keeping

The cornerstone of MTD ITSA is the requirement to keep digital records of all your business income and expenses. This means moving away from paper-based ledgers, shoeboxes of receipts, or even non-digital spreadsheets.

For each transaction, you must digitally record specific information, including:

- The date of the transaction.
- The amount of the transaction.
- The category of income or expense (e.g., sales, rent, travel, utilities).
- The nature of the transaction (a brief description).
- Any specific VAT information, if applicable, though MTD ITSA is separate from MTD VAT.

These records must be maintained within "functional compatible software." This software should be capable of storing and preserving the required digital records and interacting with HMRC's systems via an Application Programming Interface (API).

**What is "Functional Compatible Software"?** This refers to a software program or a set of software programs that can keep digital records of your business income and expenses, calculate your tax position, and send updates to HMRC digitally. It must be able to communicate with HMRC through their API. AccountsOS is an example of MTD-compatible software.

### 2. Using MTD-Compatible Software

To meet the digital record keeping and reporting requirements, you must use MTD-compatible software. This software serves as the bridge between your business records and HMRC. It must be able to:

- Record and store your income and expense data digitally.
- Categorise transactions according to HMRC's requirements.
- Generate summary figures for your quarterly updates.
- Electronically submit these summaries to HMRC.
- Receive information back from HMRC, such as your tax position.

HMRC maintains a list of software providers that offer MTD-compatible solutions. While spreadsheets can be used for initial record keeping, they require "bridging software" to connect them to HMRC's MTD system, as spreadsheets alone are not MTD-compatible. Choosing a fully integrated software solution like AccountsOS can simplify this process significantly.

### 3. Submitting Quarterly Updates

Instead of one annual tax return, MTD ITSA requires you to submit an income and expense summary to HMRC every three months. These are known as "quarterly updates" or "quarterly submissions."

Each quarterly update will report the total income and total expenses for your business or property for that specific three-month period. You will not be making tax payments at this stage, but rather providing HMRC with a snapshot of your financial activity.

#### Quarterly Period Deadlines

The quarterly periods are fixed by HMRC and generally align with calendar quarters, with a one-month grace period for submission. The deadlines are:

| Accounting Period End | Submission Deadline |
| --- | --- |
| 5 July | 5 August |
| 5 October | 5 November |
| 5 January | 5 February |
| 5 April | 5 May |

These deadlines apply to all businesses and landlords within MTD ITSA, regardless of their individual accounting period end date. If your business has an accounting period that does not align with these dates, your software will need to apportion figures accordingly.

#### Example: Quarterly Update for a Sole Trader

Consider a self-employed individual, Mark, who starts MTD ITSA from April 2026. His first MTD reporting period will be 6 April 2026 to 5 July 2026.

| Category | Income/Expense | Amount (£) |
| --- | --- | --- |
| Sales Income | Income | 12,500 |
| Cost of Goods Sold | Expense | 3,000 |
| Office Rent | Expense | 1,500 |
| Utilities | Expense | 400 |
| Travel Expenses | Expense | 250 |
| Total Income | | 12,500 |
| Total Expenses | | 5,150 |

Mark's MTD-compatible software would automatically compile these totals and submit them to HMRC by the 5 August 2026 deadline. This process repeats for each quarter throughout the tax year.

### 4. End of Period Statement (EOPS)

After your fourth quarterly update for a tax year, you will need to submit an End of Period Statement (EOPS) for each business or property income source. The EOPS allows you to finalise your income and expenses for the tax year, applying any necessary accounting adjustments, such as:

- Accruals and prepayments.
- Stock adjustments.
- Capital allowances.
- Private use adjustments.
- Any other year-end accounting entries or claims for reliefs.

The deadline for submitting your EOPS is the same as the deadline for your final declaration, which is typically 31 January following the end of the tax year. For the 2026-27 tax year, the EOPS would be due by 31 January 2028.

### 5. Final Declaration

The final step in the MTD ITSA process is the submission of a final declaration. This is similar to the current Self Assessment tax return, where you bring together all your income sources, including those not covered by MTD ITSA (e.g., employment income, dividends, savings interest), and claim any personal allowances and reliefs.

Your MTD-compatible software should integrate the information from your EOPS(s) with any other income data to help you prepare this final declaration. This declaration confirms your total taxable income and calculates your final tax liability for the year. The deadline for the final declaration is also 31 January following the end of the tax year. For the 2026-27 tax year, this would be 31 January 2028.

## Getting Ready for MTD ITSA: Practical Steps

Preparing for MTD ITSA requires proactive planning and a shift in your approach to financial administration. Starting early will help ensure a smooth transition and minimise disruption to your business or property management.

### 1. Assess Your MTD ITSA Readiness

- **Check Your Income:** Determine if your gross income from self-employment and property exceeds the £50,000 threshold for April 2026, or the £30,000 threshold for April 2027. Review your 2024-25 and 2025-26 tax returns for this calculation.
- **Review Current Record Keeping:** Evaluate your existing system. Are you currently using paper ledgers, basic spreadsheets, or accounting software? Identify gaps in digital record keeping.
- **Understand the Requirements:** Familiarise yourself with digital record keeping, quarterly updates, EOPS, and the final declaration.

### 2. Choose MTD-Compatible Software

Selecting the right software is perhaps the most critical step. Look for solutions that are:

- **HMRC-Recognised:** Ensure the software is listed as MTD-compatible by HMRC.
- **User-Friendly:** Choose software that is intuitive and easy for you to use, regardless of your accounting experience.
- **Comprehensive:** Ideally, it should handle digital record keeping, expense categorisation, quarterly reporting, and support for your EOPS and final declaration.
- **Cloud-Based:** Cloud accounting software offers flexibility, accessibility, and automatic backups, which are beneficial for MTD.

AccountsOS offers a robust, MTD-compatible solution designed to simplify your tax compliance journey.

### 3. Digitalise Your Records

- **Start Early:** Begin recording transactions digitally well before your mandatory start date. This allows you to get comfortable with the software and process.
- **Capture All Data:** Ensure all income and expenses are entered accurately and categorised correctly. This includes bank statements, invoices, receipts, and other financial documents.
- **Automate Where Possible:** Link your bank accounts to your accounting software to automatically import transactions, reducing manual data entry.

### 4. Consider Professional Advice

If you have complex financial affairs, multiple income streams, or are unsure about any aspect of MTD ITSA, engaging with an accountant or tax advisor is highly recommended. They can guide you through the transition, help set up your software, and ensure ongoing compliance. Many accountants are already well-versed in MTD for VAT and can apply that expertise to MTD ITSA.

## Exemptions from MTD ITSA

While MTD ITSA will become mandatory for a significant number of self-employed individuals and landlords, HMRC recognises that certain circumstances may prevent compliance. There are specific exemptions available, though these are typically granted on a case-by-case basis.

### Who Can Apply for an Exemption?

HMRC may grant an exemption from MTD ITSA in the following situations:

- **Digital Exclusion:** If it is not reasonably practicable for you to use digital tools to keep records or submit updates for reasons such as age, disability, remote geographical location with no internet access, or religious beliefs.
- **Insolvency:** Individuals who are bankrupt or whose businesses are in liquidation.
- **Religious Objection:** If your religious beliefs are incompatible with the requirements of MTD, you may be able to apply for an exemption.

### How to Apply for an Exemption

If you believe you qualify for an exemption, you must contact HMRC directly to explain your circumstances and formally apply. HMRC will assess your situation and determine if an exemption is appropriate. It is important to note that you cannot simply opt out of MTD ITSA; a valid reason and an approved application are required.

**Important Note on Exemptions.** Exemptions are not automatically granted and are intended for specific, genuine circumstances where digital compliance is genuinely not feasible. It is always advisable to explore MTD-compatible software solutions and seek assistance if you are struggling with digital tools before considering an exemption.

## Penalties for Non-Compliance with MTD ITSA

HMRC has introduced a new penalty system for MTD ITSA, designed to encourage timely and accurate submissions. This system moves away from fixed penalties to a points-based approach, alongside financial penalties for non-digital record keeping.

### Points-Based Penalty System for Late Submissions

This system applies to late submissions of quarterly updates, End of Period Statements (EOPS), and the final declaration.

- **Penalty Points:** For each late submission, you will receive one penalty point.
- **Penalty Threshold:** Once you accumulate a certain number of points within a given period, a financial penalty is triggered. The threshold for quarterly submissions is 4 points.
- **Financial Penalty:** A financial penalty of £200 is issued once the point threshold is reached. Subsequent penalties of £200 will be issued for every additional late submission while you remain at the threshold.
- **Point Expiry:** Points expire after 24 months, provided you have a period of good compliance (12 months of timely submissions).

#### Summary of MTD ITSA Penalties

| Scenario | Penalty |
| --- | --- |
| Late submission of quarterly updates | Points-based system, leading to financial penalties |
| Late submission of End of Period Statement (EOPS) | Points-based system, leading to financial penalties |
| Late submission of final declaration | Points-based system, leading to financial penalties |
| Failure to keep adequate digital records | Financial penalty, typically £300 for initial failure |
| Failure to use MTD-compatible software | Financial penalty, typically £300 for initial failure |

### Penalties for Failure to Keep Digital Records or Use Software

Separate penalties apply if you fail to meet the digital record keeping requirements or do not use MTD-compatible software when mandated. These can include:

- **Initial Penalty:** Typically a penalty of £300 for the initial failure to comply.
- **Daily Penalties:** In some cases, daily penalties of up to £10 may be charged for continued non-compliance.

### Penalties for Inaccurate Submissions

HMRC can also issue penalties for inaccuracies in your submissions, particularly if the inaccuracy is due to carelessness or is deliberate. The penalty amount depends on the nature of the error and whether it was unprompted or prompted by HMRC. Penalties can range from 0% to 100% of the additional tax due.

**Interest on Late Payments:** In addition to penalties, HMRC will charge interest on any tax that is paid late. This interest accrues from the payment due date until the date the tax is actually paid.

## Benefits and Challenges of MTD ITSA

While MTD ITSA introduces new obligations, it also brings potential benefits. Understanding both sides can help businesses and landlords manage the transition effectively.

### Potential Benefits

- **Reduced Errors:** Digital record keeping and real-time updates are intended to minimise common errors associated with manual data entry and year-end rushes.
- **Better Financial Overview:** Regular reporting can provide a clearer, more up-to-date picture of your business or property finances throughout the year, aiding in better financial planning and decision-making.
- **Easier Tax Management:** By spreading the tax compliance workload across the year, the pressure of a single annual tax return can be reduced.
- **Improved Cash Flow Forecasting:** With more accurate and frequent data, you can better anticipate your tax liabilities and manage cash flow more effectively.
- **Modernisation:** Embracing digital tools can streamline administrative tasks and prepare businesses for an increasingly digital economy.

### Potential Challenges

- **Initial Setup Costs:** Businesses may incur costs for purchasing MTD-compatible software or upgrading existing systems.
- **Learning Curve:** Adapting to new software and digital processes can require time and effort, particularly for those unfamiliar with digital accounting.
- **Increased Frequency of Reporting:** Quarterly updates mean more frequent interaction with tax compliance, which some may perceive as an increased administrative burden.
- **Digital Literacy:** Some individuals may struggle with the digital requirements, necessitating training or professional support.
- **Accuracy:** While MTD aims to reduce errors, inaccurate initial data entry into software can still lead to incorrect submissions and potential penalties.

The transition to MTD ITSA requires an investment of time and resources upfront. However, the long-term goal is to create a more efficient and less error-prone tax system for taxpayers and HMRC alike.

## How AccountsOS Helps You Comply with MTD ITSA

AccountsOS is designed to simplify your MTD ITSA compliance, making the transition smooth and stress-free.

### Seamless Digital Record Keeping

Automatically categorise transactions and store digital records, ready for MTD updates.

### Automated Quarterly Updates

Generate and submit your quarterly income and expense summaries directly to HMRC with ease.

### Compliance Deadlines

Receive timely reminders for quarterly submissions, EOPS, and your final declaration.

### End of Period Statement (EOPS)

AccountsOS helps prepare the figures needed for your EOPS, simplifying year-end compliance.

## Frequently asked questions

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

MTD ITSA is an HMRC initiative requiring 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 replaces the traditional annual self-assessment process for those in scope.

### How is the £50,000 income threshold calculated?

The £50,000 threshold is based on your gross income from all self-employment businesses and property income combined in the previous tax year. If this combined gross income exceeds £50,000, you will need to comply with MTD ITSA from April 2026.

### What counts as 'digital records' for MTD ITSA?

Digital records mean maintaining a digital format of all relevant business transactions, including income and expenses. This typically involves using MTD-compatible software to record the date, amount, category, and nature of each transaction, rather than paper ledgers.

### Can I use spreadsheets for MTD ITSA?

You can use spreadsheets to record your transactions, but they must be combined with 'bridging software' that connects the spreadsheet data to HMRC's MTD system. This bridging software must be MTD-compatible and approved by HMRC.

### What happens if my income falls below the threshold?

If your gross income falls below the MTD ITSA threshold in a subsequent tax year, you may be able to exit MTD. However, once mandated, most individuals typically remain within the MTD system for simplicity and continued compliance.

### Are there any exemptions from MTD ITSA?

Yes, certain individuals are exempt, including those who are genuinely unable to engage digitally due to age, disability, or remoteness, or for religious reasons. Individuals who are insolvent or whose businesses are in liquidation may also be exempt. You must apply to HMRC for an exemption.

### What is an End of Period Statement (EOPS)?

The EOPS is a summary of your business or property income and expenses for the tax year, submitted after your final quarterly update. It allows you to make any necessary accounting adjustments or claims for reliefs before your final declaration.

### How does MTD ITSA affect my accountant?

MTD ITSA requires accountants to use MTD-compatible software to submit updates on behalf of their clients. It shifts the compliance process from a single annual event to ongoing digital record keeping and quarterly submissions, potentially changing the nature of client-accountant interactions.

## Related guides

- [Self Assessment Explained](/filing/self-assessment)
- [Understanding Allowable Expenses](/guides/allowable-expenses)
- [All Tax Deadlines UK](/deadlines)