Pillar Guide · Updated June 2026

Making Tax Digital for Income Tax (MTD ITSA) 2026/27

The biggest change to self-employed and landlord tax reporting in a generation begins on 6 April 2026. Making Tax Digital for Income Tax Self Assessment (MTD ITSA) replaces the single annual return with digital record-keeping, four quarterly updates and a final declaration — all through compatible software. It applies first to those with combined self-employment and property income over £50,000, with a £30,000 threshold following in April 2027. This guide explains exactly who is in scope, how the new reporting cycle works, the software and digital records you will need, the new points-based penalties, who is exempt, and a clear step-by-step plan to get ready in good time.

Last updated: 2 June 2026Last reviewed: 2 June 2026How we verify

Who Is in Scope from April 2026

MTD ITSA applies from 6 April 2026 to self-employed people and landlords whose combined gross income from self-employment and property exceeds £50,000. The threshold is measured on gross income — turnover and rent before expenses — not on profit. So a sole trader with £40,000 of turnover and £15,000 of rental income is in scope, even if their taxable profit is far lower.

The figure is taken from your most recent Self Assessment return. HMRC writes to taxpayers it believes are in scope, but the duty to check and comply rests with you. If you are below £50,000 in 2026/27, you are not yet required to use MTD ITSA — but the £30,000 threshold in April 2027 will sweep in many more people.

If you are self-employed, the self-employed tax guide covers how your profits are taxed alongside these new reporting rules.

Quarterly Updates and the Final Declaration

The headline change is the move from one annual return to a rolling cycle. During the tax year you send four quarterly updates to HMRC, each a cumulative summary of the income and expenses for your business and property, submitted through your software on the standard quarterly deadlines.

The quarterly updates are running summaries, not full tax calculations. After the tax year ends you complete a final declaration, where you finalise the figures, add any other income (such as employment, dividends or savings interest), claim reliefs and confirm your overall position. The final declaration replaces the old Self Assessment return for these income sources.

Crucially, this changes how you report, not how much tax you pay. Your liability is still calculated on profits using the normal rates and allowances, and payment dates are unchanged.

Compatible Software

You must use HMRC-recognised, MTD-compatible software to keep your digital records and submit the quarterly updates and final declaration. You cannot file MTD ITSA through the old HMRC online Self Assessment form.

Options range from full cloud bookkeeping packages to lightweight apps aimed at landlords and sole traders, plus bridging software that links an existing spreadsheet to HMRC. HMRC publishes a list of compatible products. Choosing and setting up your software before the tax year starts is the single most important preparation step.

Digital Records

MTD ITSA requires you to keep digital records of each item of income and expense — the amount, date and category — in compatible software or a linked spreadsheet, recorded as transactions happen rather than gathered up once a year.

The defining principle is digital linking: data must flow from your records to HMRC without manual re-typing that could introduce errors. You do not have to scan every receipt, but the transaction details must live in your digital records and be kept up to date through the year. In practice this nudges everyone towards continuous bookkeeping.

The New Points-Based Penalties

MTD ITSA uses a points-based penalty system for late submissions. Each late quarterly update or final declaration earns a penalty point. Once you accumulate points up to a set threshold (which depends on your submission frequency), a fixed financial penalty applies, and each further late submission triggers another penalty. Points expire after a sustained period of compliance.

Late payment of tax is dealt with separately, with penalties that increase the longer the tax remains unpaid, plus interest on the outstanding amount. The points approach is designed to be more proportionate than the old automatic fines — an occasional slip does not immediately cost money, but persistent lateness does.

The £30,000 Threshold from April 2027

From April 2027, MTD ITSA extends to self-employed people and landlords whose combined gross income exceeds £30,000. The requirements are identical: digital records, quarterly updates and a final declaration.

If your income sits between £30,000 and £50,000, you have a year's grace — but it is wise to adopt digital record-keeping during 2026/27 so the change is seamless when it lands. Further reductions to the threshold are expected in later years, so MTD ITSA will eventually reach the majority of sole traders and landlords.

Exemptions

Some people can be exempt. The main route is digital exclusion — where it is not reasonably practicable to use the software because of age, disability, remoteness of location or religious grounds. Certain trustees, personal representatives and other specific groups are also outside the scope.

You must apply to HMRC for an exemption; you are not automatically exempt simply because you find software difficult. Until an exemption is granted, you should plan to comply in full.

How to Prepare: 5 Steps

Check your scope: add together gross self-employment and property income; if over £50,000, you are in from April 2026 (£30,000 from April 2027).
Choose software: pick HMRC-recognised MTD-compatible software, or bridging software for your spreadsheet, and set up your income sources.
Keep digital records: record income and expenses digitally as they happen, from the start of the tax year.
Submit quarterly: send each quarterly update through your software on the standard deadlines.
Final declaration: after the year-end, finalise figures, add other income and reliefs, and submit the final declaration.

Official References

FAQs

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

MTD ITSA is HMRC's system that requires self-employed people and landlords to keep digital records and report their income and expenses to HMRC quarterly using compatible software, instead of filing a single Self Assessment return once a year for those income sources. It is part of the wider Making Tax Digital programme, which already applies to VAT. The aim is more frequent, software-based reporting and fewer errors.

Who has to use MTD ITSA from April 2026?

From 6 April 2026, MTD ITSA is mandatory for self-employed people and landlords whose combined gross income from self-employment and property is over £50,000. The threshold is based on gross income (turnover and rent before expenses), not profit. From April 2027 the threshold drops to £30,000, bringing many more people into scope. Further reductions are expected in later years.

How often do I have to report under MTD ITSA?

You send four quarterly updates to HMRC during the tax year, each summarising your income and expenses for that quarter, followed by a final declaration after the year-end. The quarterly updates are cumulative summaries rather than full tax calculations — the final declaration is where you confirm the figures, add any other income and claim reliefs, replacing the old annual Self Assessment return for these sources.

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What software do I need for MTD ITSA?

You need HMRC-recognised, MTD-compatible software that can keep digital records and submit quarterly updates and the final declaration. Options range from full bookkeeping packages to simpler apps, and bridging software that connects an existing spreadsheet to HMRC. HMRC publishes a list of compatible products. You cannot file MTD ITSA through the old HMRC online Self Assessment form, so getting software in place early is essential.

What counts as a digital record under MTD ITSA?

You must record each item of business and property income and each expense digitally, in compatible software or a spreadsheet linked to it, capturing the amount, date and category. The key rule is digital linking: data must flow from your records to HMRC without manual re-typing that could introduce errors. You do not have to scan every receipt, but the transaction details must be kept digitally and kept up to date through the year.

What are the new MTD ITSA penalties?

MTD ITSA uses a points-based penalty system. Each late quarterly update or final declaration earns a penalty point; once you reach a threshold of points (which depends on how often you are required to submit), a fixed financial penalty applies, and further late submissions trigger more penalties. Points expire after a period of compliance. Late payment of tax is charged separately, with penalties that increase the longer the tax remains unpaid, plus interest. The system is designed to be more proportionate than the old automatic fines.

Is anyone exempt from MTD ITSA?

Yes. People who are digitally excluded — for example because of age, disability, remoteness of location or religious grounds — can apply for an exemption, as can those for whom it is not reasonably practicable to use the software. Certain trustees, personal representatives and some other groups are also outside the scope. If you think you qualify, you must apply to HMRC; you are not automatically exempt just because you find software difficult. Until an exemption is granted, you should plan to comply.

Does MTD ITSA change how much tax I pay?

No. MTD ITSA changes how and how often you report, not the amount of tax due. Your tax is still calculated on your profits using the same rates, allowances and reliefs. The main difference is the move from one annual return to quarterly updates plus a final declaration, and the requirement to keep digital records. Payments on account and the tax payment dates are unaffected by the reporting change.

How is the £50,000 threshold measured?

It is based on your qualifying gross income from self-employment and property combined, as reported on your most recent Self Assessment return. Gross means turnover and rental income before deducting expenses. So a sole trader with £40,000 turnover and £15,000 of rent would be over the £50,000 threshold even if their profit is much lower. HMRC writes to people it believes are in scope, but the responsibility to check and comply rests with you.

What happens to the £30,000 group in April 2027?

From April 2027, MTD ITSA extends to self-employed people and landlords whose combined gross income is over £30,000. These taxpayers will face the same requirements: digital records, quarterly updates and a final declaration. If you are between £30,000 and £50,000, you are not yet in scope in 2026/27 but should prepare during the year so the transition is smooth when it arrives.

How should I prepare for MTD ITSA now?

Check whether your combined gross income is over £50,000; if so, choose MTD-compatible software and set it up before the tax year starts. Begin keeping digital records from day one rather than scrambling at the quarter-end, and speak to your accountant about who will submit the quarterly updates. Even if you are below £50,000 now, getting into the habit of digital record-keeping ahead of the £30,000 threshold in 2027 will make the change painless.

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About the author

Emma Clarke

UK Tax Writer

Emma Clarke has been writing about UK personal tax since 2018, with a particular focus on Self Assessment, PAYE coding and the practical mechanics of how HMRC actually applies the rules to ordinary salaries. Her work concentrates on translating the dense language of HMRC manuals and Finance Act schedules into worked examples that show, pound by pound, how income tax and National Insurance reduce a gross salary to the figure that lands in a UK bank account. Emma covers the full PAYE lifecycle: tax codes (1257L, BR, K codes, emergency codes), the Marriage Allowance, the High Income Child Benefit Charge, salary sacrifice arrangements and their effect on pensionable pay, the Apprenticeship Levy, and the differences between the rUK and Scottish income-tax regimes. She is particularly interested in the edge cases that catch PAYE employees out — the £100,000 personal-allowance taper, the 60% effective marginal rate it creates, and the interaction between student-loan plans and pension contributions. Every figure in Emma's articles is verified against the current HMRC rates pages and worked through a Self Assessment calculation by hand before publication. She writes to CalcHub's editorial standards: primary-source citations, plain English, no promotional language, and clear "this is general information, not financial advice" disclaimers where appropriate.

Personal-finance writer since 2018
UK tax specialism — PAYE, Self Assessment, National Insurance
Writes to CalcHub editorial standards (primary-source citation, annual review)

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Disclaimer: This guide explains the Making Tax Digital for Income Tax rules as they apply from April 2026, with the £30,000 threshold from April 2027. Thresholds, software requirements, penalties and timetables can change at fiscal events. Consult a qualified accountant about your obligations, and refer to gov.uk for current guidance.