From 6 April 2026, sole traders and landlords earning over £50,000 must keep digital records, submit four quarterly updates, and file a final declaration through HMRC-approved software.
The deadline is fixed. HMRC began writing to eligible taxpayers in early 2025 using 2024/25 return data – if no letter has been received, compliance remains. If you or your clients meet the threshold and have not yet prepared, now is the time to act.
MTD ITSA requires three things: keeping all business records digitally, submitting four quarterly income and expense updates to HMRC each year via compatible software and completing a final declaration at the end of the tax year. That final declaration replaces the traditional Self-Assessment return.
Key Takeaways
Sole traders and landlords with qualifying income over £50,000 in 2024/25 must comply from 6 April 2026
MTD ITSA requires digital record keeping, four quarterly updates to HMRC and a year-end final declaration
Only HMRC-recognised software can be used to submit. Paper records and standard spreadsheets without bridging software are not compliant
A points-based penalty system applies from 2027/28 for late quarterly submissions, with late payment penalties active from April 2026
Exemptions exist but must be applied for and are not granted automatically
Who is Affected by MTD ITSA from April 2026?
Qualifying income determines both whether MTD ITSA applies and when. The first step is working out who falls in scope and under which phase.
MTD ITSA applies from April 2026 to:
- Sole traders whose gross self-employment income exceeds £50,000 in the 2024/25 tax year
- Landlords whose gross property income exceeds £50,000 in the 2024/25 tax year
- Individuals with combined self-employment and property income exceeding £50,000 in the same period
The threshold is based on gross receipts before expenses, not profit. A sole trader invoicing £55,000 but netting £30,000 after costs is still in scope from April 2026.
Partnerships are not included in the April 2026 mandation. HMRC has confirmed it intends to bring partnerships into MTD ITSA in the future, but no start date has been set.
MTD ITSA is being rolled out in three phases – the table below shows which income threshold applies and when.
| Phase | Start Date | Income Threshold |
|---|---|---|
| Phase 1 | April 2026 | Over £50,000 |
| Phase 2 | April 2027 | Over £30,000 |
| Phase 3 | April 2028 | Over £20,000 |
Clients approaching the £30,000 threshold should begin preparation immediately. The setup steps are the same regardless of which phase applies.
Note: The £20,000 threshold for Phase 3 has been announced by HMRC but is subject to confirmation in future legislation.
MTD ITSA 2026 Checklist for £50k+ Clients
Each step below should be completed in order. Skipping ahead creates problems later, particularly around software setup and HMRC sign-up, both of which take longer than expected.
1. Confirm Qualifying Income and Threshold
Calculate combined gross self-employment and property income for the 2024/25 tax year. HMRC will use the figures from the 2024/25 Self-Assessment return to determine who is in scope.
- If the total exceeds £50,000, MTD ITSA applies from 6 April 2026
- If it falls between £30,000 and £50,000, Phase 2 applies from April 2027, but preparation should begin now regardless
2. Set Up Digital Record Keeping Immediately
MTD ITSA requires all income and expenses to be recorded digitally from the start of the first mandated tax year.
- Paper records are not compliant
- Standard spreadsheets are not compliant unless connected to HMRC-recognised software via bridging software
- Records must be kept current and must not be reconstructed at the end of each quarter
Bridging Software – Bridging software connects a standard spreadsheet to HMRC’s system for compliant submissions. It is a short-term option – full MTD-compatible accounting software is recommended for ongoing ease and reliability
Do not wait until April 2026 – migrating existing records takes time, and any gaps will surface in the first quarterly submission.
3. Choose and Register with MTD-Compatible Software
HMRC publishes a list of MTD-compatible software on GOV.UK that has been tested and recognised for use under the scheme.
Widely used MTD-compatible options include QuickBooks, Xero, FreeAgent, Sage, and TaxCalc – all available on GOV.UK’s approved software list
The software must be capable of:
- Keeping digital records
- Submitting quarterly updates directly to HMRC
- Producing the end-of-period statement and final declaration
Signing up to use software is a separate step from enrolling in MTD ITSA itself. Both are required before the first submission deadline.
Most MTD-compatible software starts from around £10–£30 per month. Some free options exist for landlords with simple income – check GOV.UK’s approved list for current pricing
4. Sign Up for MTD ITSA with HMRC
Each client must individually sign up for MTD ITSA, either through their chosen software or through their tax agent.
- HMRC may write to some clients who appear to be in scope, but compliance remains the client’s responsibility regardless of whether a letter is received
- Agents must hold a valid agent services account and have client authorisation in place before submitting on a client’s behalf
- Sign-up should not be left until the last minute as HMRC processing times can vary
5. Understand the Quarterly Reporting Obligations
Four quarterly updates are due each tax year, following the standard April to April tax year. Deadlines fall on the 7th of the second month after each quarter ends.
- Each update is a summary of income and expenses, not a full tax return
- Clients can elect to use calendar quarters if preferred, subject to HMRC’s alternative period rules
- After the fourth update, a final declaration must be submitted by 31 January following the end of the tax year
6. Review Current Bookkeeping Processes
Any client still using paper records, annual spreadsheet summaries, or manual bank reconciliations must update their approach before April 2026. Quarterly submissions require records to be current throughout the year, not compiled at the end of it.
Gaps to identify and resolve now include:
- Unreconciled bank accounts
- Missing or incomplete receipts
- Uncategorised income entries
MTD ITSA Penalties: What Happens If Clients Do Not Comply?
Non-compliance under MTD ITSA carries structured and cumulative consequences. Understanding how the penalty framework operates helps clients treat their filing obligations seriously from the outset.
HMRC applies a points-based penalty system for late quarterly submissions under MTD ITSA.
- Each missed submission deadline adds one penalty point to the client’s record
- Once a quarterly filer accumulates 4 penalty points, a £200 financial penalty is charged
- Each further late submission beyond that threshold triggers an additional £200 penalty
- Points can be reset by maintaining a consistent record of on-time submissions, but any penalties already charged are not reversed
HMRC has confirmed a soft landing for the 2026/27 tax year. Penalty points will not be issued for late quarterly updates during that first year. However, late payment penalties and interest charges apply from April 2026 and are not covered by the soft landing.
Important: The soft landing only covers late quarterly submission penalty points. Late payment penalties and interest charges apply in full from April 2026, they are not deferred.
| Submission Type | Penalty Threshold | Penalty Amount |
|---|---|---|
| Quarterly updates | 4 points | £200 per penalty |
| Final declaration | 2 points | £200 per penalty |
MTD ITSA Exemptions: Who May Not Need to Comply?
Exemptions from MTD ITSA exist but are granted only in specific circumstances. A client cannot self-declare an exemption. It must be applied for and approved by HMRC before the relevant mandation date.
HMRC may grant an exemption where digital compliance is not reasonably practicable. Circumstances that may qualify include:
- No broadband or internet access at the client’s location
- Age or disability that prevents the use of digital tools
- Other exceptional personal circumstances, assessed by HMRC on a case-by-case basis
Clients who believe they may qualify should apply to HMRC directly and well in advance of their mandation date. Anyone who does not apply, or who applies and is declined, will be treated as fully subject to MTD ITSA from their relevant phase start date.
To apply for an exemption, contact HMRC’s Self-Assessment helpline or apply online through your HMRC account. Apply at least 3 months before your mandation date.
Partnerships remain outside the scope of the April 2026 and April 2027 mandations. HMRC has indicated that partnerships will be brought in at a future point, but no confirmed date has been announced.
Conclusion
April 2026 is the live date for sole traders and landlords with qualifying income over £50,000. The 2024/25 tax year, which HMRC will use to assess Phase 1 eligibility, has already ended.
The six steps in this checklist cover everything needed to prepare: confirm qualifying income, begin digital record keeping, select compatible software, sign up with HMRC, understand the quarterly cycle and review current bookkeeping processes.
Preparation time is limited. Getting started now is the only way to avoid a compliance scramble when the first quarterly deadline arrives in August 2026.
If you or your clients are in scope from April 2026, speak to the team at DNS CloudCo to get ahead of the deadline.
FAQs
What is MTD for ITSA?
MTD ITSA stands for Making Tax Digital for Income Tax Self-Assessment. It requires eligible sole traders and landlords to keep digital records and submit quarterly updates to HMRC.
When does MTD ITSA go live?
MTD ITSA becomes mandatory from 6 April 2026 for those with qualifying gross income over £50,000 in the 2024/25 tax year.
Who needs to comply with MTD ITSA from April 2026?
Sole traders and landlords with gross qualifying income over £50,000 in 2024/25 must comply. Combined self-employment and property income both count toward the threshold.
Is there a threshold for MTD ITSA?
Yes, the Phase 1 MTD ITSA threshold is £50,000 of gross qualifying income in the 2024/25 tax year, based on turnover, not profit.
What software is MTD compliant?
HMRC publishes a list of MTD-compatible software on GOV.UK. It must support digital records, quarterly submissions and the final declaration.
How does quarterly reporting work under MTD ITSA?
Four quarterly updates summarising income and expenses are submitted each tax year, followed by a final declaration by 31 January.
What are the penalties for not complying with MTD ITSA?
Each missed submission earns one penalty point. At 4 points, a £200 penalty applies. Late payment penalties and interest apply from April 2026.
Will partnerships be included in MTD ITSA?
Not under current mandation phases. HMRC has confirmed partnerships will be included in the future, but no date has been set.
Are there exemptions from MTD ITSA?
Yes, in limited circumstances such as no internet access or a disability preventing digital use. Exemptions must be applied for and approved by HMRC.
Yes, agents must hold a valid agent services account and have client authorisation before submitting quarterly updates on a client’s behalf.
How will HMRC enforce MTD ITSA?
HMRC will identify in-scope clients from 2024/25 Self-Assessment returns. Compliance is the individual’s responsibility regardless of whether HMRC makes contact.
What happens if you do not comply with MTD ITSA?
Missed submissions generate penalty points leading to £200 financial penalties. Late payment charges and interest apply separately from April 2026.
Is MTD for Income Tax mandatory?
Yes, MTD for Income Tax is mandatory for eligible sole traders and landlords from April 2026, with further phases extending to lower thresholds in 2027 and 2028.
How do I prepare for MTD ITSA?
Confirm your 2024/25 qualifying income, choose HMRC-approved software, sign up via your agent or software and ensure digital records are in place before April 2026.
Does the final declaration replace Self-Assessment?
Yes. The final declaration under MTD replaces the traditional Self-Assessment tax return. It confirms your total income and final tax position for the year.
What is bridging software?
Bridging software connects your spreadsheets (like Excel) to HMRC’s MTD system, allowing you to submit data without fully switching to new accounting software.
How much does MTD software cost?
MTD software typically ranges from £10 to £40 per month, depending on features, users, and level of automation.
Can my accountant sign me up?
Yes. Your accountant can register you for MTD and manage submissions on your behalf as an authorised agent.
Can I use calendar quarters instead of April quarters?
Yes. You can choose calendar quarters (Jan–Mar, Apr–Jun, etc.), but once selected, you must follow the same pattern consistently.
Divyanshi is a subject matter expert in the UK accounting space, creating clear and easy-to-read content for accountants and businesses. She covers topics such as VAT returns, Self-assessment tax, bookkeeping, business planning and Year-end accounts. By understanding the common challenges faced by accountants and business owners, she focuses on writing content that answers real questions and simplifies complex topics. Her approach keeps information clear, relevant and useful for everyday business needs.
