Making Tax Digital for Income Tax UK 2026/27: Who Must Comply and How

What is MTD ITSA and Why is it Happening?

Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is HMRC's programme to move income tax reporting from a single annual return to a year-round digital process. The policy rationale is threefold: to reduce the tax gap caused by errors and lost records; to give taxpayers real-time visibility of their tax liability; and to move HMRC toward a fully digital tax administration system.

Under MTD ITSA, sole traders and landlords keep records digitally, submit summarised income and expense data to HMRC four times a year (the quarterly updates), then file an End of Period Statement (EOPS) and a Final Declaration at year-end. The Final Declaration replaces the SA100 Self Assessment tax return. The process is completed entirely through HMRC-recognised software -- not through the existing HMRC online portal.

MTD for VAT has been mandatory since 2019 (extended to all VAT-registered businesses in 2022), so HMRC has substantial experience rolling out digital tax obligations. MTD ITSA follows the same broad architecture but applies to income tax rather than VAT.

Who is In Scope -- The Three Threshold Dates

MTD ITSA applies to individuals who are both within Self Assessment and have qualifying income above the relevant threshold. Qualifying income is the total gross (before expenses) income from:

• Self-employment -- sole trader trading income from one or more businesses.
• UK property income -- gross rental receipts from residential or commercial property let in the UK.

If you have both sources, you add the gross amounts together to assess your position against the threshold. The rollout is staggered:

Example -- landlord and sole trader combined: You earn GBP 28,000 gross from your plumbing business and GBP 24,000 gross rental income from two buy-to-let properties. Combined qualifying income = GBP 52,000. You are above the GBP 50,000 threshold and must comply from 6 April 2026, even though neither source alone exceeds GBP 50,000.

Who is not in scope: Employees whose income is taxed entirely through PAYE with no self-employment or property income. General partnerships (deferred -- HMRC will announce separate dates). Individuals with qualifying income at or below the relevant threshold. Those with very simple tax affairs who use the trading income allowance (GBP 1,000) or property income allowance (GBP 1,000) and have nothing further to declare are unlikely to be within Self Assessment at all.

The MTD ITSA Cycle -- Quarterly Updates Explained

The quarterly update is the heart of MTD ITSA. Each quarter, your compatible software submits a summary of your income and expenses for that period directly to HMRC's systems. The update is not a tax payment and does not create an immediate tax liability -- it is an informational filing that gives HMRC (and you) an in-year view of your financial position.

There are two permitted quarterly period options:

• Standard periods: 6 April to 5 July; 6 July to 5 October; 6 October to 5 January; 6 January to 5 April. Submission deadline: the 5th of the following month (e.g., 5 August for the first quarter).
• Calendar quarter election: if your software supports it, you can elect to use calendar quarters (1 April to 30 June, etc.). HMRC allows this to reduce the administrative complexity of the awkward 6th-to-5th periods.

Each quarterly update must include the income and expenses for that period, categorised into HMRC's prescribed income and expense categories. You do not need to provide a profit figure or tax calculation -- the software handles this. HMRC uses the submitted data to produce an in-year tax estimate visible through your software or HMRC's Business Tax Account.

End of Period Statement -- Finalising the Year

After your four quarterly updates, you submit an End of Period Statement (EOPS) for each source of income. If you are both self-employed and a landlord, you submit separate EOPS for each business. The EOPS is the stage at which you:

• Review and correct the quarterly figures.
• Make accounting adjustments (for example, accruals and prepayments if you use an accruals basis).
• Claim capital allowances -- including the Annual Investment Allowance (AIA, permanently set at GBP 1,000,000 per year) and Writing Down Allowances.
• Claim the cash basis election if appropriate (the default for most sole traders).
• Declare that the figures are correct and complete to the best of your knowledge.

The EOPS deadline is 31 January following the end of the tax year -- the same date as the old Self Assessment filing deadline. You cannot proceed to the Final Declaration until all required EOPS have been submitted and confirmed.

Final Declaration -- Replacing the SA Return

The Final Declaration is the MTD ITSA equivalent of the Self Assessment tax return. It consolidates your complete tax picture for the year, adding any income and claims not covered by the quarterly updates and EOPS.

In the Final Declaration you can add:

• Dividend income (subject to the GBP 500 dividend allowance; any excess taxed at 10.75% basic, 35.75% higher, 39.35% additional).
• Savings and bank interest (subject to the personal savings allowance).
• Capital gains (taxed at 18%/24% for most assets; Business Asset Disposal Relief at 18% up to GBP 1m lifetime limit).
• Employment income not fully taxed through PAYE.
• Pension contributions for additional relief (contributions above the employer scheme may attract higher-rate relief claimed here).
• Gift Aid donations -- extending the basic-rate band by the grossed-up donation amount.
• Reliefs such as the trading income allowance (GBP 1,000) or property income allowance (GBP 1,000) if not already claimed in the EOPS.

The Final Declaration deadline is also 31 January following the tax year end. The tax balance payment deadline and payments on account dates (31 January and 31 July) remain unchanged.

Choosing Compatible Software -- What to Look For

You must use HMRC-recognised compatible software for MTD ITSA -- manual spreadsheets submitted via copy-paste are not compliant. HMRC publishes a regularly updated list of recognised software on GOV.UK. When selecting software, consider the following:

Popular HMRC-recognised MTD ITSA software providers include QuickBooks, Xero, FreeAgent, Sage, and several specialist sole-trader products. Many accountants have a preferred platform -- check with your adviser before committing to a package, as migrating bookkeeping systems mid-year adds complexity.

The HMRC Pilot Programme -- Joining Early

HMRC has operated a voluntary MTD ITSA pilot since 2018, allowing eligible taxpayers to experience the full MTD process before it becomes mandatory. The pilot was opened to a wider audience from 2023 and is available to most sole traders and UK landlords with straightforward tax affairs.

Benefits of joining the pilot ahead of the mandatory date include:

• Learning the software and submission process without penalty risk.
• Identifying record-keeping gaps before they become a compliance issue.
• Providing HMRC with feedback that may improve the process before wider rollout.
• Demonstrating diligence to HMRC, which may be relevant if there are early teething issues.

The pilot may not be suitable for taxpayers with: Lloyd's of London income; construction industry scheme (CIS) deductions; certain foreign income; or very complex mixed sources. Check eligibility on GOV.UK before registering your software for pilot participation.

Civil Penalties -- The Points-Based System

HMRC has introduced a new points-based late-submission penalty regime for MTD ITSA, replacing the old flat penalties that applied under Self Assessment.

How points accrue: Each missed quarterly update submission earns one penalty point. Once you reach the threshold of four points (equivalent to missing every quarterly update in a year), a GBP 200 financial penalty is charged and your points reset to zero. Points expire automatically after 24 months of clean compliance, so occasional missed submissions do not result in permanent escalating penalties.

Late payment penalties are separate from submission penalties and apply on unpaid income tax:

• 2% of unpaid tax if still outstanding 15 days after the due date.
• A further 2% (cumulative 4%) if outstanding 30 days after the due date.
• 4% per annum (daily accrual) from day 31 until payment.

HMRC also charges interest on late payments at the Bank of England base rate plus 2.5% from the day after the due date. Penalties can be appealed if you have a reasonable excuse -- for example, serious illness, bereavement, software failure outside your control, or a natural disaster. HMRC publishes guidance on what constitutes a reasonable excuse.

MTD ITSA and the GBP 50,000 Income Tax Threshold -- How it Interacts

MTD ITSA uses qualifying income thresholds (GBP 50,000 / GBP 30,000 / GBP 20,000) that are independent of income tax thresholds. Do not confuse them with the higher-rate tax threshold (GBP 50,270 for 2026/27) or the personal allowance taper entry point (GBP 100,000).

However, there are important interactions to be aware of:

• MTD ITSA from April 2026 (GBP 50,000): Many sole traders and landlords in this income bracket will also be higher-rate taxpayers paying 40% on profits above GBP 50,270. Accurate quarterly updates help these taxpayers avoid underpaying and facing penalties plus interest.
• Payments on account: If your previous year's Self Assessment tax liability exceeded GBP 1,000, you already make payments on account on 31 January and 31 July. MTD ITSA does not change these dates or amounts -- but the in-year tax estimate from quarterly updates helps you budget more accurately for them.
• Personal allowance taper: The personal allowance tapers from GBP 100,000 to GBP 125,140, creating a 60% effective marginal rate. Self-employed taxpayers in this bracket should use their in-year MTD estimate to consider making pension contributions to reduce adjusted net income below GBP 100,000 -- the pension annual allowance is GBP 60,000 for 2026/27.
• MTD ITSA threshold vs. MTD for VAT: If your turnover exceeds GBP 90,000, you are already in MTD for VAT. MTD ITSA is a separate obligation -- you must comply with both independently, though many MTD-ready accounting platforms handle both VAT and income tax submissions.

Practical Steps to Prepare for MTD ITSA

Whether your mandatory start date is April 2026, 2027, or 2028, early preparation significantly reduces the risk of late or incorrect submissions. The following checklist covers the main actions:

Partnerships -- The Deferred Position

General partnerships are currently excluded from the MTD ITSA mandatory rollout. HMRC has stated that partnerships will be brought into scope at a later date, but no specific start date has been announced as of June 2026. Limited liability partnerships (LLPs) and limited partnerships are also deferred.

Individual partners who separately have qualifying self-employment or property income above the relevant threshold in their own right are still subject to MTD ITSA for those personal income sources -- independently of the partnership's deferred position. Partners should not assume that their partnership membership exempts them from MTD ITSA obligations on personal income sources.

Professional bodies including ICAEW, ACCA, CIOT, and ATT publish regular updates on partnership MTD timelines. If you are in a partnership, subscribe to updates from these bodies or check HMRC's MTD ITSA guidance page on GOV.UK periodically.