# What Software Do Sole Traders and Landlords Need for Making Tax Digital for Income Tax from April 2026? Last updated: 22 September 2026 From 6 April 2026, sole traders and landlords with qualifying gross income over £50,000 must use HMRC-compatible software for Making Tax Digital for Income Tax, which requires digital record keeping, quarterly updates, and annual submissions. ## Understanding Making Tax Digital for Income Tax (MTD ITSA) The landscape of tax reporting for sole traders and landlords in the UK is undergoing a significant transformation with HMRC's Making Tax Digital for Income Tax, often referred to as MTD ITSA. Following a series of consultations and a recent deferral, the latest guidance confirms that from 6 April 2026, eligible businesses must embrace digital record keeping and submit tax information to HMRC quarterly, rather than annually. This pivotal shift necessitates the use of HMRC-compatible software, moving away from traditional manual methods or simple spreadsheets. This comprehensive guide outlines precisely what sole traders and landlords need to know about MTD ITSA software. We will delve into who is affected, the core requirements, essential features to look for in compatible software, and how AccountsOS can streamline your compliance journey. Understanding these requirements now is crucial to ensure a smooth transition and avoid potential penalties once the new rules come into effect. ## What is Making Tax Digital for Income Tax (MTD ITSA)? Making Tax Digital for Income Tax Self Assessment, or MTD ITSA, is a government initiative to modernise the UK tax system, making it more efficient, more effective, and easier for taxpayers to get their tax right. It marks a fundamental change in how sole traders and landlords report their income and expenses to HMRC. Instead of a single annual tax return, MTD ITSA requires digital record keeping and more frequent, accurate submissions throughout the tax year. ### Who is Affected by MTD ITSA? The initial phase of MTD ITSA targets specific groups of taxpayers: - **Sole Traders:** Individuals who run their own business as a sole proprietor. - **Landlords:** Individuals who receive income from property rentals. Critically, the requirement to join MTD ITSA is determined by your qualifying gross income. ### Income Thresholds and Key Dates | Date | Event | | --- | --- | | 6 April 2026 | MTD ITSA starts for income over £50,000 | | 6 April 2027 | MTD ITSA expands to income over £30,000 | | Quarterly | Updates to HMRC via software | From **6 April 2026**, sole traders and landlords with a qualifying gross income from their business or property of **£50,000 or more** will be mandated to comply with MTD ITSA. This threshold will then be lowered to **£30,000 or more** from **6 April 2027**, bringing more taxpayers into the MTD regime. It is important to note that partnerships are expected to join MTD ITSA at a later date, yet to be confirmed. ### Core Requirements of MTD ITSA For those who fall within the MTD ITSA scope, there are four key obligations: - **Digital Record Keeping:** You must keep digital records of all your business income and expenses. This means no more paper ledgers or non-digital spreadsheets. - **Quarterly Updates:** You must send summary updates of your business income and expenses to HMRC at least every three months, using MTD-compatible software. These are not full tax returns, but rather summaries to give HMRC a near real-time view of your finances. - **End of Period Statement (EOPS):** After the end of your accounting period, you must submit an End of Period Statement for each business or property income source. This allows for any final accounting adjustments, claims for allowances, and confirmation of your taxable profits or losses. - **Final Declaration:** Once all EOPS have been submitted for all your income sources, you must submit a Final Declaration. This combines all your business and property income, along with any other income sources not covered by MTD ITSA, to calculate your final tax liability for the year. This replaces the traditional Self Assessment tax return. ### Why is MTD ITSA Being Introduced? HMRC's primary motivations behind MTD ITSA are to: - **Reduce the Tax Gap:** By requiring more frequent and digital submissions, HMRC aims to reduce errors, both accidental and deliberate, that contribute to the UK's 'tax gap': the difference between the tax that should be paid and what is actually paid. - **Simplify Tax for Businesses:** While initially perceived as complex, the long-term goal is to make tax simpler for businesses by integrating it into day-to-day accounting, providing a clearer, real-time view of tax liabilities. - **Modernise the Tax System:** Aligning the UK tax system with digital advancements seen in other sectors, providing a more modern and accessible service for taxpayers. - **Improve Tax Certainty:** Regular updates mean taxpayers have a more accurate, up-to-date understanding of their tax position throughout the year, enabling better financial planning and fewer year-end surprises. The transition to MTD ITSA represents a significant operational change for many sole traders and landlords. The cornerstone of this transition is the adoption of appropriate digital software. ## The Role of MTD-Compatible Software The simple answer to "What software do sole traders and landlords need for Making Tax Digital for Income Tax from April 2026?" is: **HMRC-recognised, MTD-compatible software.** This is not merely an optional tool; it is the mandatory conduit through which you will meet your MTD ITSA obligations. HMRC has a list of software providers that meet their specifications for MTD ITSA. Crucially, the software must be capable of: - **Keeping digital records:** Storing all income and expense data electronically. - **Sending quarterly updates:** Transmitting summary data directly to HMRC's systems. - **Submitting End of Period Statements (EOPS):** Calculating and submitting final business adjustments. - **Submitting a Final Declaration:** Consolidating all income and calculating the final tax liability. ### Types of MTD-Compatible Software MTD-compatible software generally falls into a few categories: - **End-to-End Accounting Software:** These are comprehensive packages that handle all aspects of your digital record keeping, from invoicing and expense tracking to bank reconciliation and direct submission of MTD ITSA updates. AccountsOS falls into this category, offering a complete solution. - **Bridging Software:** If you prefer to keep your digital records in a spreadsheet, bridging software acts as a link between your spreadsheet and HMRC. It takes the summary data from your spreadsheet and converts it into an MTD-compliant format for submission. While this allows continued use of spreadsheets, the spreadsheet itself must maintain digital links, meaning no manual copy-pasting of data between cells. - **Property Management Software with MTD Integration:** Some specialised property management software may offer MTD ITSA functionality, allowing landlords to manage their properties and comply with MTD from a single platform. For most sole traders and landlords, an end-to-end accounting software solution offers the most streamlined and compliant approach. It minimises the risk of errors associated with manual data entry or complex digital links between different systems. ## Key Features to Look for in MTD ITSA Software Selecting the right MTD ITSA software is paramount for smooth compliance. It should not just meet HMRC's basic requirements, but also offer features that genuinely simplify your financial management. Here are the critical features to consider: ### Digital Record Keeping Automate the logging of income and expenses directly from bank feeds. ### Automated Quarterly Updates Seamlessly submit summaries of income and expenses to HMRC. ### End of Period Statement (EOPS) Functionality to make adjustments and finalise business income and expenses. ### Final Declaration Submission Consolidate all income sources and submit your final tax position. ### Bank Feed Integration Connect directly to your bank accounts for automatic transaction import. ### Expense Categorisation Intelligent categorisation of expenses to ensure accuracy and maximise deductions. ### Data Security & Compliance Ensure your financial data is secure and meets HMRC's stringent requirements. ### User-Friendliness & Support Intuitive interface with readily available customer support for any queries. ### Additional Desirable Features - **Reporting and Insights:** Beyond compliance, good software should offer financial reports that help you understand your business's performance, profitability, and cash flow. - **Invoicing Capabilities:** If you issue invoices, integrated invoicing can streamline your sales process and automatically record income. - **Multi-Device Access:** Cloud-based software allows you to access your accounts from anywhere, on any device, which is ideal for sole traders and landlords on the go. - **Integration with Other Tools:** Consider if the software integrates with other tools you use, such as payment processors, e-commerce platforms, or CRM systems. - **Scalability:** Choose software that can grow with your business. As your income increases or your operations become more complex, you want software that can adapt without requiring a complete overhaul. - **Audit Trail:** A robust audit trail ensures that every transaction and change is recorded, providing transparency and accountability, which is crucial for HMRC enquiries. **HMRC Recognition is Non-Negotiable.** Always verify that any software you consider is explicitly listed as MTD-compatible by HMRC for Income Tax Self Assessment. Using non-compliant software will lead to penalties. HMRC provides an official list on GOV.UK. ## Choosing the Right MTD ITSA Software for Your Business With numerous MTD-compatible software options available, selecting the best fit for your specific circumstances requires careful consideration. It is not a one-size-fits-all decision. ### Assessing Your Needs Before diving into specific software products, take stock of your current situation and future requirements: - **Business Type and Complexity:** Are you a single sole trader with minimal transactions, or a landlord with multiple properties and diverse income streams? The complexity of your operations will dictate the features you need. - **Volume of Transactions:** High transaction volumes will benefit from automated bank feeds and robust categorisation tools. Lower volumes might allow for simpler, more manual input if preferred. - **Existing Accounting Practices:** Are you currently using paper, spreadsheets, or older accounting software? Consider the ease of migrating your existing data to a new MTD-compliant system. - **Technical Proficiency:** How comfortable are you with new technology? Opt for software with an intuitive interface if you prefer simplicity, or a more feature-rich option if you are tech-savvy. - **Budget:** MTD software comes with various pricing models, typically monthly subscriptions. Compare costs with the features offered and ensure it fits within your budget. ### Factors to Consider When Evaluating Software - **HMRC Recognition:** Reiterate this as the absolute top priority. Any software must be on HMRC's official list of MTD ITSA compatible software. - **Ease of Use:** The software should be intuitive. A complex interface can lead to errors and frustration, defeating the purpose of MTD. Many providers offer free trials, which are excellent for testing usability. - **Customer Support:** What kind of support is available? Phone, email, live chat, online knowledge bases? Timely and effective support can be invaluable, especially during initial setup or when encountering issues. - **Security:** Ensure the software provider has robust security measures in place to protect your sensitive financial data. Look for encryption, two-factor authentication, and compliance with data protection regulations. - **Mobile App Availability:** For those who manage their finances on the go, a well-designed mobile app can be a significant advantage for recording expenses or checking balances. - **Reviews and Reputation:** Check independent reviews from other users. While individual experiences vary, a consistent pattern of positive or negative feedback can be very informative. - **Future-Proofing:** Does the software provider have a roadmap for future development? MTD requirements may evolve, so choosing a provider committed to staying up-to-date is wise. Taking the time to research and trial different MTD-compatible software options will pay dividends in the long run, ensuring you choose a system that simplifies your tax obligations and supports your business's financial health. ## How AccountsOS Supports MTD for Income Tax AccountsOS is designed to be a comprehensive, user-friendly, and HMRC-recognised solution for sole traders and landlords navigating the requirements of Making Tax Digital for Income Tax. We understand the challenges of adapting to new tax rules, and our platform is built to simplify every step of your MTD ITSA journey. ### Key AccountsOS Features for MTD ITSA Compliance - **Automated Digital Record Keeping:** AccountsOS connects directly to your bank, categorising transactions for MTD ITSA compliance. - **Seamless Quarterly Submissions:** Generate and submit your quarterly updates to HMRC with just a few clicks, reducing errors and saving time. - **EOPS and Final Declaration Support:** We guide you through the End of Period Statement and Final Declaration processes, ensuring all adjustments are correctly made. - **Real-time Tax Estimates:** See your estimated tax liability update throughout the year, helping you plan finances and avoid surprises. ### Why Choose AccountsOS for Your MTD ITSA Needs? - **HMRC-Recognised:** AccountsOS is officially recognised by HMRC as MTD-compatible software for Income Tax Self Assessment, ensuring your compliance. - **Designed for Simplicity:** Our intuitive interface is built for sole traders and landlords, regardless of their accounting experience. You do not need to be an expert to manage your tax digitally. - **Time-Saving Automation:** Reduce manual data entry and administrative burden with automated bank feeds and intelligent categorisation, freeing up your time to focus on your business or properties. - **Comprehensive Support:** Access our extensive knowledge base and dedicated customer support team to assist you with any questions or issues you may encounter. - **Secure and Reliable:** Your financial data is protected with industry-leading security measures, ensuring privacy and compliance with data protection regulations. - **Cost-Effective:** AccountsOS offers competitive pricing plans tailored to the needs of small businesses and landlords, providing excellent value for MTD ITSA compliance. By choosing AccountsOS, you are not just selecting a piece of software; you are partnering with a solution designed to make Making Tax Digital for Income Tax straightforward, efficient, and stress-free. ## The MTD ITSA Compliance Journey: Step-by-Step Navigating MTD ITSA can seem daunting, but breaking it down into manageable steps makes the process clear. Here is a step-by-step guide to ensure you are ready for the 2026 deadline and beyond. ### Step 1: Check Your Eligibility The very first step is to determine if you fall within the scope of MTD ITSA. - **From 6 April 2026:** Mandatory if your gross income from self-employment and/or property is £50,000 or more in a tax year. - **From 6 April 2027:** Mandatory if your gross income from self-employment and/or property is £30,000 or more in a tax year. Your gross income is the total amount before deducting any expenses or tax-free allowances. If you have multiple businesses or properties, you must combine their gross incomes to check if you meet the threshold. ### Step 2: Choose Your MTD-Compatible Software Once you confirm your eligibility, the next crucial step is to select and implement HMRC-recognised MTD ITSA software. - **Research:** Explore options like AccountsOS, which offer end-to-end solutions. - **Verify:** Always check HMRC's official list of MTD-compatible software. - **Trial:** Take advantage of free trials to test usability and features. - **Set Up:** Configure your chosen software, connecting bank accounts and importing any initial data. ### Step 3: Register for MTD ITSA with HMRC After you have your software ready, you must officially register for MTD ITSA with HMRC. - You will need your Government Gateway user ID and password. - You cannot register until your software is set up. Your software provider may guide you through this process. - Do not cancel your existing Self Assessment registration, as MTD ITSA replaces it, it does not remove it entirely. ### Step 4: Keep Digital Records This is an ongoing obligation. From your MTD ITSA start date, all relevant business and property income and expenses must be recorded digitally within your software. - Use bank feeds for automatic transaction import. - Categorise transactions accurately as they occur. - Ensure all records are complete and reflect the true financial position of your business. ### Step 5: Submit Quarterly Updates At least every three months, you must submit a summary of your income and expenses to HMRC via your MTD-compatible software. - **Deadlines:** These are typically set to align with your accounting period. For example, if your accounting period ends on 5 April, your quarterly periods might be 6 April to 5 July, 6 July to 5 October, 6 October to 5 January, and 6 January to 5 April. Submissions are due one month after the end of each quarter. - **What to Submit:** The software will generate summaries of your digital records for each quarter. These are not final tax calculations but estimates. ### Step 6: Submit End of Period Statement (EOPS) After your accounting year ends, you must submit an EOPS for each individual business or property income source. - **Purpose:** This is where you make any final accounting adjustments, claim capital allowances, or declare any other reliefs specific to that business. - **Deadline:** The EOPS must be submitted by 31 January following the end of the tax year. For example, for the tax year ending 5 April 2027, the EOPS is due by 31 January 2028. ### Step 7: Submit Your Final Declaration The Final Declaration consolidates all your MTD ITSA income and any other taxable income not covered by MTD. - **Consolidation:** This includes all your business and property income, plus any employment income, pensions, savings income, etc., to determine your total tax liability. - **Replaces Self Assessment:** This final submission replaces your traditional Self Assessment tax return. - **Deadline:** The Final Declaration is due by 31 January following the end of the tax year. For example, for the tax year ending 5 April 2027, the Final Declaration is due by 31 January 2028. Following these steps meticulously with your chosen MTD-compatible software will ensure you remain compliant with HMRC's new digital tax regime. ## Exemptions and Deferrals for MTD ITSA While MTD ITSA will become mandatory for eligible sole traders and landlords, there are limited circumstances under which an individual or business may be exempt or granted a deferral. It is important to understand that these are not automatically applied and require specific application to HMRC. ### Who Might Be Exempt? HMRC recognises that not everyone can reasonably comply with digital requirements. Exemptions are primarily granted on grounds of 'digital exclusion', which can encompass: - **Age or Disability:** Individuals whose age, disability, or remoteness from digital services makes it unreasonable for them to use digital tools for tax. - **Religious Objections:** For those whose religious beliefs are incompatible with using electronic communications or keeping digital records. - **Insolvency:** If a business is subject to insolvency procedures, the insolvency practitioner may apply for an exemption. - **Lack of Internet Access:** If it is not reasonably practicable to use digital tools due to lack of internet access, for example, in very remote areas. It is crucial to note that simply not wanting to use digital software or finding it inconvenient is not a valid reason for exemption. HMRC expects taxpayers to make reasonable efforts to comply. ### How to Apply for an Exemption If you believe you qualify for an exemption, you must contact HMRC directly to explain your circumstances. They will assess your case individually. - **Contact HMRC:** Use the contact details on the GOV.UK website for MTD ITSA enquiries. - **Provide Evidence:** Be prepared to provide evidence or a detailed explanation of why you cannot meet the digital requirements. - **Wait for a Decision:** Continue to meet your existing tax obligations until HMRC confirms an exemption. ### Deferrals While the main MTD ITSA deadlines are now set for April 2026 and April 2027, HMRC may grant individual deferrals in exceptional circumstances, such as severe personal hardship or a significant unforeseen event preventing compliance. These are rare and granted on a case-by-case basis. **Do not assume you are exempt or will receive a deferral.** It is always best to prepare for MTD ITSA compliance and seek an exemption only if you genuinely meet the strict criteria. Non-compliance without a granted exemption will lead to penalties. ## Common Pitfalls and How to Avoid Them Transitioning to MTD ITSA presents new challenges, and there are several common mistakes that sole traders and landlords might make. Being aware of these pitfalls can help you avoid them and ensure a smooth compliance journey. ### Not Starting Early Enough The biggest mistake is often underestimating the time and effort required to adapt. - **Pitfall:** Waiting until just before the April 2026 deadline to choose software and set up digital record keeping. - **Avoidance:** Start researching and trialling MTD-compatible software now. Begin digitising your records voluntarily before the mandatory start date to familiarise yourself with the process and iron out any issues. ### Incorrect or Incomplete Record Keeping The foundation of MTD ITSA is accurate digital records. - **Pitfall:** Missing transactions, incorrect categorisation of income or expenses, or not keeping digital copies of source documents. - **Avoidance:** Utilise automated bank feeds and expense categorisation features in your software. Regularly reconcile your accounts. Keep digital receipts and invoices linked to transactions where possible. ### Missing Deadlines for Submissions MTD ITSA introduces quarterly deadlines, which are more frequent than traditional annual returns. - **Pitfall:** Forgetting to submit quarterly updates, EOPS, or the Final Declaration, leading to penalties. - **Avoidance:** Choose software with built-in deadline reminders. Set up calendar alerts. Consider engaging an accountant who can manage submissions on your behalf. ### Choosing Unsuitable Software Not all MTD-compatible software is right for every business. - **Pitfall:** Selecting software that is too complex, lacks necessary features, or is not genuinely HMRC-recognised. - **Avoidance:** Thoroughly research and compare options. Use free trials to test functionality and user-friendliness. Ensure the software is on HMRC's official list. AccountsOS offers a tailored solution for sole traders and landlords. ### Not Understanding the Requirements A lack of clarity on MTD ITSA rules can lead to non-compliance. - **Pitfall:** Misinterpreting what needs to be submitted, how often, or the difference between quarterly updates, EOPS, and the Final Declaration. - **Avoidance:** Read HMRC guidance, consult with an accountant, and utilise resources like this guide. Most MTD software, including AccountsOS, provides explanations and prompts to guide you through each submission type. By proactively addressing these potential pitfalls, sole traders and landlords can ensure a smoother and more compliant transition to Making Tax Digital for Income Tax. ## Penalties for Non-Compliance with MTD ITSA HMRC has a clear penalty regime in place for non-compliance with Making Tax Digital for Income Tax. These penalties are designed to encourage timely and accurate submissions. Understanding them is crucial to avoid unnecessary financial penalties. ### Late Submission Penalties For late quarterly updates, End of Period Statements (EOPS), and Final Declarations, HMRC will implement a points-based system. - **Penalty Points:** For each missed submission deadline, you will receive a penalty point. - **Penalty Threshold:** Once you reach a certain number of points within a specified period (e.g., 4 points for annual filers, more for quarterly), a financial penalty of £200 is issued. - **Further Penalties:** Additional £200 penalties can be issued for every subsequent missed submission once the points threshold is reached. - **Points Expiry:** Points expire after a certain period of compliance, providing an incentive to get back on track. ### Late Payment Penalties and Interest Separate to submission penalties, HMRC will also charge penalties and interest on any tax paid late. - **Interest:** HMRC charges interest on all unpaid tax from the day it becomes due until it is paid. This rate is typically the Bank of England base rate plus 2.5%. - **First Penalty:** A penalty of 5% of the unpaid tax will be charged if the tax remains unpaid 30 days after the due date. - **Second Penalty:** Another 5% penalty is charged if the tax is still unpaid 6 months after the due date. - **Third Penalty:** A further 5% penalty is charged if the tax is still unpaid 12 months after the due date. ### Penalties for Inaccuracies If your submissions contain errors that lead to an underpayment of tax, HMRC can issue penalties for inaccuracies. The severity of the penalty depends on the nature of the error: - **Careless Error:** If you did not take reasonable care, penalties range from 0% to 30% of the additional tax due. - **Deliberate but not Concealed:** Penalties range from 20% to 70% of the additional tax due. - **Deliberate and Concealed:** Penalties range from 30% to 100% of the additional tax due. HMRC may reduce penalties if you disclose errors unprompted and cooperate fully. - **Late Quarterly Update: Points-based system, leading to financial penalties.** Each missed submission accrues penalty points. Once a threshold is reached, a £200 penalty is issued. Further penalties apply for continued non-compliance. - **Late End of Period Statement (EOPS): Points-based system, leading to financial penalties.** Similar to quarterly updates, late EOPS submissions will incur penalty points, potentially resulting in £200 fines. - **Late Final Declaration: Points-based system, leading to financial penalties.** The annual Final Declaration is critical. Missing this deadline will also result in penalty points and associated fines. - **Late Tax Payment: Interest and percentage-based penalties.** HMRC charges interest on overdue tax at the Bank of England base rate plus 2.5%. Additionally, penalties of 5% of the unpaid tax are applied after 30 days, 6 months, and 12 months. - **Inaccurate Records: Up to 100% of the additional tax due.** Penalties for inaccuracies depend on whether the error was careless, deliberate, or concealed, ranging from 0% to 100% of the potential lost revenue. **The best way to avoid penalties is to use MTD-compatible software that helps you keep accurate records and reminds you of upcoming deadlines.** AccountsOS is designed with these safeguards in mind. ## Benefits Beyond Compliance While the primary driver for adopting MTD-compatible software is compliance with HMRC regulations, the transition offers significant benefits that extend far beyond simply avoiding penalties. Embracing digital accounting can transform how sole traders and landlords manage their finances, leading to greater efficiency, better insights, and more informed decision-making. ### Improved Financial Visibility Digital record keeping and quarterly updates provide a much clearer, real-time picture of your financial position. - **Up-to-Date Information:** No more waiting until year-end to see your profit and loss. You will have a continuous understanding of your income and expenses. - **Better Cash Flow Management:** With real-time data, you can anticipate cash flow challenges and opportunities, making better decisions about spending and saving. - **Accurate Tax Estimates:** Software can provide ongoing estimates of your tax liability, helping you set aside funds and avoid year-end tax surprises. ### Streamlined Processes and Time Savings Automating many aspects of financial management can significantly reduce the administrative burden. - **Reduced Manual Entry:** Bank feeds automatically import transactions, eliminating tedious manual data input. - **Faster Reconciliation:** Matching transactions to bank statements becomes quicker and more accurate. - **Efficient Submissions:** Quarterly updates and annual statements are generated and submitted with minimal effort, saving hours compared to manual preparation. ### Reduced Errors and Enhanced Accuracy Digital systems inherently minimise the risk of human error associated with manual record keeping. - **Automated Calculations:** Software performs calculations, reducing mistakes in totals or tax figures. - **Consistent Categorisation:** AI and rule-based categorisation help ensure expenses are consistently and correctly allocated. - **Digital Audit Trail:** Every transaction is recorded and traceable, making it easier to verify information and respond to HMRC queries. ### Easier Tax Planning and Forecasting With regular financial updates, tax planning becomes a proactive process rather than a reactive one. - **Strategic Decisions:** Understand the impact of business decisions on your tax bill throughout the year. - **Optimised Deductions:** Easily track and claim all allowable expenses, ensuring you do not overpay tax. - **Future Forecasting:** Use current data to project future income and expenses, aiding in business growth and investment plans. Ultimately, MTD ITSA, while a compliance requirement, presents an opportunity for sole traders and landlords to modernise their financial management, gain greater control over their finances, and foster more robust, data-driven businesses. ## Future Outlook: MTD ITSA Expansion Making Tax Digital for Income Tax is being rolled out in phases, and the current deadlines for April 2026 and April 2027 are just the beginning. HMRC's long-term vision is for MTD to become the standard for almost all taxpayers. Understanding the future trajectory can help sole traders and landlords prepare even if they are not yet mandated to join. ### The £30,000 Threshold from April 2027 The most immediate expansion will occur from **6 April 2027**, when the qualifying gross income threshold for MTD ITSA will be lowered to **£30,000 or more**. - **Increased Scope:** This will bring a significant number of additional sole traders and landlords into the MTD regime. - **Proactive Preparation:** If your income is currently between £30,000 and £50,000, it is advisable to start familiarising yourself with MTD requirements and software well in advance of April 2027. ### Future Plans for Partnerships While sole traders and landlords are the initial focus, MTD will eventually extend to partnerships. - **Later Date:** HMRC has confirmed that partnerships will be mandated to join MTD ITSA at a later date, which is yet to be announced. - **Similar Principles:** It is expected that the core principles of digital record keeping, quarterly updates, and annual submissions via compatible software will apply to partnerships as well. ### Potential for Other Income Types In the longer term, there is a possibility that MTD could expand to other forms of income not currently covered by ITSA, such as employment income or other investment income. However, no concrete plans or timelines for such an expansion have been announced. **Stay Informed.** HMRC continually updates its guidance on MTD. It is advisable to regularly check the official GOV.UK website and reliable sources like AccountsOS for the latest information and any further changes to the MTD roadmap. The ongoing expansion of MTD underscores the importance of adopting digital accounting practices now. Even if you are not currently mandated, familiarising yourself with MTD-compatible software can provide a significant advantage for future compliance and overall financial management. ## Frequently asked questions ### Do I need MTD ITSA software if my income is below £50,000? From April 2026, MTD ITSA is mandatory for those with gross income over £50,000. From April 2027, this threshold drops to £30,000. If your income is below these thresholds, you are not currently required to join MTD ITSA, but can do so voluntarily. ### Can I use spreadsheets for MTD ITSA? You can use spreadsheets for digital record keeping, but you will still need MTD-compatible bridging software to send your quarterly updates and annual submissions to HMRC. The spreadsheet itself must meet specific digital link requirements. ### What if I have multiple income sources, for example, a sole trade and property income? If your combined qualifying gross income from all sole trades and property businesses exceeds the MTD ITSA threshold, you must comply. Your chosen software should be able to handle and consolidate all relevant income streams. ### What happens if I miss a quarterly update deadline? HMRC operates a points-based penalty system for late MTD ITSA submissions. Each missed submission will accrue penalty points, and once a certain threshold is met, a financial penalty will be issued. It is crucial to stay on top of deadlines. ### Is there any way to be exempt from MTD ITSA? Limited exemptions exist for individuals who are digitally excluded, for example, due to age, disability, or remoteness, or for religious objections. You must apply to HMRC for an exemption, which is not automatically granted. ### How do I register for MTD for Income Tax? Once you have chosen your MTD-compatible software, you will need to register with HMRC for MTD for Income Tax. Your software provider may offer guidance on this process, or you can register directly via the GOV.UK website. ### What is the difference between an End of Period Statement and a Final Declaration? The End of Period Statement (EOPS) is for each individual business or property income source, where you make any accounting adjustments. The Final Declaration brings together all your MTD ITSA income sources, plus any other taxable income, to calculate your overall tax liability for the year. ### Can my accountant handle MTD ITSA for me? Yes, many accountants offer MTD ITSA services. They can use MTD-compatible software on your behalf to manage your digital records and submit your quarterly updates and annual statements. Discuss this option with your accountant if you prefer professional assistance. ## Related guides - [HMRC MTD Guidance](https://www.gov.uk/government/collections/making-tax-digital-for-income-tax) - [MTD Deadlines Explained](/deadlines/mtd-itsa) - [Sole Trader Tax Guide](/guides/sole-trader-tax) - [Landlord Tax Guide](/guides/landlord-tax)