Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA): What you need to know 

Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) is set to change the way self-employed individuals, landlords, and sole traders manage their tax obligations.  

From April 2026, those with an gross business or property income over £50,000 will be required to keep digital records and submit quarterly updates to HMRC. The annual self-assessment tax return will be replaced by an end of year declaration and digital tax return. 

This guide will explain what MTD for ITSA means, who it affects, and how to prepare to avoid penalties and disruptions. 

What is Making Tax Digital for Income Tax Self-Assessment? 

MTD for ITSA is part of the government’s initiative to modernise the UK tax system. Instead of filing a single annual tax return, self-employed individuals and landlords will need to: 

• Keep digital records of income and expenses using HMRC-approved software 
• Submit quarterly updates to HMRC (every three months) 
• File an end-of-year declaration instead of an annual self-assessment tax return 

Why is this happening? HMRC’s goal is to reduce errors, improve tax efficiency, and provide you with a clearer picture of any tax liabilities throughout the year. 

Who does MTD for ITSA apply to? 

MTD for ITSA will apply to: 

• Individuals/Sole traders/Landlords with an annual gross income from,  business and/or property income above £50,000 from April 2026.  
• Those with gross income over £30,000 will also be required to comply (from April 2027). 
• Those that are self-employed, a sole trader, or a landlord, and your total turnover from business or rental income exceeds these thresholds, you must switch to MTD for ITSA 
• If your income is below these thresholds, you can continue filing a self-assessment tax return as usual, but HMRC may extend MTD in the future 

Partnerships and limited companies are not yet included in MTD for ITSA, but further changes are expected in the coming years. 

Even if you’re below the threshold, it’s a good idea to start using digital tax software now to get ahead of the changes. 

What changes under MTD for ITSA? 

Instead of one tax return per year, you’ll need to submit multiple reports to HMRC: 

• Quarterly updates – Every three months, you must submit a report summarising your income and expenses. 

• End-of-period statement (EOPS) – A final submission to confirm your total annual income and claim tax reliefs. 

• Final declaration – Similar to an annual tax return, confirming that all tax is correct and ready for payment. 

Tip: This means more frequent reporting, so keeping real-time digital records is essential. 

What software do you need for MTD for ITSA? 

You must use HMRC-approved MTD-compatible software to record and submit tax data.  

Popular options include: 

• Xero 
• QuickBooks 
• FreeAgent 
• Sage 
• HMRC-approved bridging software (for spreadsheets users – spreadsheets alone won’t be compliant. You’ll need bridging software if you don’t use cloud accounting) 

How do I need to prepare for MTD for ITSA? 

To avoid last-minute stress, take these steps now: 

• Check if you meet the income threshold – If your gross income is over £50,000, MTD for ITSA applies from April 2026 
• Move to digital record-keeping – If you’re still using paper records, these transactions must be recorded on approved software. 
• Get familiar with quarterly reporting – Start tracking your income and expenses monthly so you’re not scrambling every three months 
• Work with an accountant – An accountant can ensure you’re MTD-compliant, claim all tax reliefs, and keep your records HMRC-ready 

Tip: Don’t leave it until the last minute – we recommend using MTD-compatible software now so you’re ready when the changes take effect 

What happens if you don’t comply? 

If you fail to register for MTD for ITSA or submit inaccurate reports, HMRC may apply penalties. 

• Late submissions = automatic fines. 
• Incorrect reporting = potential tax investigations. 
• Failure to keep digital records = non-compliance penalties. 

Tip: Avoid fines by ensuring you’re registered, using MTD software, and submitting reports on time. 

How can an accountant help with MTD for ITSA? 

At BAS, we specialise in Making Tax Digital compliance and can help you: 

• Choose and set up MTD-compatible software 
• Ensure your records are accurate and tax-efficient 
• Handle quarterly submissions so you stay compliant 
• Provide expert tax advice to minimise liabilities 

MTD for ITSA is coming – are you ready?  

Don’t wait until 2026 to get prepared. Contact our team of accountants today and let us help you make the switch seamlessly!