Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is now live for anyone with income over £50,000. If you're in scope and haven't signed up yet, you're already behind. Here's exactly what it means, what software you need, and how the quarterly deadlines work.
What Is MTD ITSA?
MTD ITSA requires sole traders and landlords to keep digital records and submit quarterly updates directly to HMRC through compatible software — instead of a single annual Self Assessment return. It replaces the traditional January 31st filing with four quarterly submissions plus a final end-of-year declaration.
Think of it as HMRC moving from annual tax returns to real-time reporting. The annual Self Assessment return doesn't disappear entirely — you still do a final reconciliation — but the bulk of reporting now happens quarterly.
Who Is In Scope Right Now (2026/27)
From April 2026, MTD ITSA is mandatory for anyone whose combined qualifying income exceeds £50,000. Qualifying income includes self-employment income (sole trader profits) and property income (UK rental income).
If your income from these sources combined is above £50,000, you are in scope now.
- From April 2027: threshold drops to £30,000
- From April 2028: threshold drops to £20,000 — bringing the vast majority of sole traders and landlords into scope
What Quarterly Reporting Actually Means
You'll need to submit a summary of your income and expenses to HMRC four times a year:
- Q1: 6 April – 5 July (deadline: 5 August)
- Q2: 6 July – 5 October (deadline: 5 November)
- Q3: 6 October – 5 January (deadline: 5 February)
- Q4: 6 January – 5 April (deadline: 5 May)
Each submission is a summary — income total and expense total by category — not a transaction-by-transaction report. But you must keep digital records that support those figures.
At the end of the year, you submit a Final Declaration confirming the figures and including any additional income (employment, savings, dividends) not part of your quarterly submissions.
What Software Do You Need?
You must use HMRC-recognised software. A spreadsheet or your bank's export doesn't count on its own — though bridging software can connect a spreadsheet to HMRC's API if that's your preferred workflow.
The main compatible options are Xero, QuickBooks, FreeAgent, and Sage. At TechEdge we use Xero and set it up so quarterly submissions are largely automated — the data flows in, we review it, and it goes to HMRC on time. You don't need to understand the technical side.
Penalties for Getting It Wrong
MTD ITSA uses a points-based penalty system:
- 1 point per missed quarterly update
- At 4 points: £200 financial penalty
- Each subsequent failure: additional £200
- Points reset after 24 months of full compliance
There are also separate late payment penalties and interest on unpaid tax.
What To Do Right Now If You're Over £50,000
- Check you're registered for MTD ITSA — log into your HMRC online account and confirm your status.
- Choose your software — you need HMRC-compatible software in place by your first quarterly deadline.
- Start keeping digital records from 6 April 2026 — paper records or manual spreadsheets need to change.
- Don't leave it to January — the entire point of MTD ITSA is that you can't batch everything up at year-end anymore.
💡 If you're between £30,000 and £50,000: you have until April 2027, but this is the right time to get your software in place. Being compliant before the deadline is always easier than scrambling at it.
In scope for MTD ITSA and not set up yet?
We handle the full setup — software, HMRC registration, quarterly submissions, and year-end declaration. Fixed fee, no surprises.
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