From April 6, 2026, Making Tax Digital for Income Tax — known as MTD for ITSA — becomes mandatory for sole traders and landlords earning more than £50,000 per year. It is the most significant overhaul of how UK taxpayers report their income in a generation, and with the deadline now days away, many businesses are still scrambling to get ready.
What Is Making Tax Digital for Income Tax?
Making Tax Digital is HMRC’s programme to move tax reporting away from the traditional annual self-assessment return and towards a system of quarterly digital submissions. Under MTD for Income Tax, affected taxpayers must keep digital records of their income and expenses using HMRC-compatible software, and submit four quarterly updates to HMRC every year rather than one annual return.
At the end of the tax year, taxpayers will also need to submit a Final Declaration — broadly equivalent to the current self-assessment return — confirming their total income and any adjustments. The system replaces the annual January 31 deadline with an ongoing, quarterly process throughout the year.
Who Is Affected from April 2026?
The first wave of MTD for ITSA affects sole traders and landlords with gross annual income exceeding £50,000. This includes:
- Self-employed individuals with business turnover above £50,000
- Landlords with rental income above £50,000
- People with combined self-employment and rental income above £50,000
The threshold will drop in subsequent years. From April 2027, those earning above £30,000 will be brought in, and from April 2028 the threshold drops further to £20,000 — eventually capturing a significant proportion of the self-employed and property-owning population.
What Software Do You Need?
One of the practical challenges of MTD is that taxpayers must use HMRC-recognised software to keep their records and submit their returns. This means Excel spreadsheets and paper records are no longer sufficient on their own, though some bridging software allows spreadsheet users to submit digitally via a compatible tool.
HMRC maintains a list of approved software providers on its website. Options range from free tools aimed at sole traders with simple affairs to fully featured accounting packages for businesses with more complex needs. If you are not already using approved software, getting set up before April 6 should be your immediate priority.
The Penalties Picture
HMRC has confirmed that the first year of MTD will include a grace period for late quarterly submissions specifically — meaning that penalty points will not be issued for missing the quarterly deadlines during the 2026/27 tax year. However, this grace period does not apply to late payments of tax or to the final annual declaration. Penalties for those remain fully in force from day one.
The message from HMRC is clear: get your payments right and get your Final Declaration in on time, even if you are still finding your feet with the quarterly reporting process.
Are Businesses Ready?
Research by accountancy firm Azets found that 94% of businesses affected by the first wave of MTD for Income Tax were either unprepared or only partially prepared as of early 2026. That is an alarming figure given how close the April 6 start date is, and it points to a significant challenge for accountants, bookkeepers and software providers in getting clients compliant in time.
Many sole traders have historically managed their own tax affairs with minimal administrative overhead. The shift to quarterly digital reporting represents a substantial increase in the ongoing compliance burden, and some will need professional support for the first time.
Key Dates for MTD for ITSA
For those entering the system from April 6, 2026, the key reporting windows are:
- Quarter 1 (April 6 – July 5): submission due by August 5
- Quarter 2 (July 6 – October 5): submission due by November 5
- Quarter 3 (October 6 – January 5): submission due by February 5
- Quarter 4 (January 6 – April 5): submission due by May 5
- Final Declaration: due by January 31 of the following year
Advice for Landlords
Property landlords are among those most likely to be caught out by MTD. Many landlords manage their finances informally — collecting rent, paying mortgage interest, and filing a relatively straightforward self-assessment each January. Under MTD, they will need to track income and expenses on an ongoing basis and submit quarterly updates even if their rental activity is relatively simple.
Accountancy firms have urged landlord clients to speak with their advisers immediately and to begin using compatible software as soon as possible, even before the April 6 deadline. Building good digital record-keeping habits now will make the quarterly submissions considerably less stressful.
Getting Help
HMRC has published extensive guidance on MTD for ITSA on the GOV.UK website. Professional bodies including the Institute of Chartered Accountants in England and Wales (ICAEW) and the Association of Taxation Technicians (ATT) have also produced resources for those navigating the transition. If you are unsure whether you are caught by the April 2026 rules or what steps you need to take, speaking to a qualified accountant should be your first port of call.