Making Tax Digital for ITSA: Who It Applies To and When
- info1984908
- Feb 11
- 3 min read
The UK tax system is undergoing one of its biggest transformations in decades. From 6 April 2026, HM Revenue & Customs (HMRC) will begin mandating Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) for eligible taxpayers.
If you are a sole trader or landlord, these changes may apply to you sooner than you think.
Here’s what you need to know.
What Is Making Tax Digital for ITSA?
Making Tax Digital (MTD) is HMRC’s initiative to modernise the tax system. For Income Tax, it means:
Keeping digital records of income and expenses
Sending quarterly updates to HMRC using approved software
Submitting a final declaration at the end of the tax year
This replaces the traditional once-a-year Self Assessment tax return for those within scope.
HMRC states that MTD aims to reduce errors, improve accuracy and help taxpayers better understand their tax position throughout the year.
(Source: HMRC guidance on GOV.UK – Making Tax Digital for Income Tax for sole traders and landlords)
Who Must Comply — And When?
MTD for ITSA is being introduced in phases based on your qualifying income.
Qualifying income is your total gross income (before expenses) from:
Self-employment
UK or overseas property
From 6 April 2026
You must comply if your qualifying income is over £50,000.
From 6 April 2027
The threshold reduces to over £30,000.
From 6 April 2028 (Planned)
The government intends to extend MTD for ITSA to those earning over £20,000.
HMRC will review your latest Self Assessment return and notify you if you are required to join.
(Source: HMRC policy paper – Extension of Making Tax Digital for Income Tax Self Assessment to sole traders and landlords, GOV.UK)
Who Is Not Affected?
Currently, MTD for ITSA does not apply to:
Individuals taxed only under PAYE
Limited companies (they fall under Corporation Tax rules)
Income solely from pensions, savings or dividends
Partnerships (separate implementation timeline expected)
However, if you are a limited company director and also receive rental income or sole trader income above the threshold, MTD for ITSA may still apply to you.
What Will You Need To Do?
If you fall within scope, you will need to:
1️⃣ Keep Digital Records
You must store income and expense records digitally using HMRC-compatible software.
2️⃣ Submit Quarterly Updates
Instead of filing one annual return, you will send updates to HMRC every three months.
3️⃣ Submit a Final Declaration
At the end of the tax year, you will confirm your total income and make any necessary adjustments before paying your tax bill.
You will still pay Income Tax by the usual deadlines (including Payments on Account if applicable).
(Source: HMRC guidance – Find software compatible with Making Tax Digital for Income Tax, GOV.UK)
Why Is HMRC Introducing MTD?
According to HMRC, the main objectives are:
Reducing taxpayer errors
Closing the tax gap
Giving taxpayers real-time visibility of their tax position
Creating a more modern, digital tax system
MTD for VAT has already been successfully implemented, and Income Tax is the next phase of digital reform.
How to Prepare Now
Even if April 2026 feels far away, preparation should start now.
We recommend:
✔ Reviewing your latest tax return to check your qualifying income
✔ Moving to digital accounting software if you still use spreadsheets or paper records
✔ Ensuring your bookkeeping is up to date
✔ Speaking to your accountant about quarterly reporting
Early preparation avoids stress, penalties and rushed software decisions.
How Ideal Accountancy Can Help
At Ideal Accountancy, we help sole traders and landlords:
Determine whether MTD for ITSA applies to them
Set up HMRC-compatible accounting software
Manage quarterly submissions
Stay fully compliant with HMRC requirements
If you're unsure whether you’ll fall within the 2026 or 2027 thresholds, our team can review your position and create a tailored plan.
👉 Contact us today to prepare for Making Tax Digital with confidence.
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