Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) became mandatory for many self-employed people and landlords from 6 April 2026. If your qualifying income from self-employment or property — or both combined — exceeds £50,000 in the 2024/25 tax year, you are now legally required to comply.
This article explains exactly what that means, what you need to do, and what happens if you do not.
Who Is Affected Right Now?
MTD for ITSA currently applies to you if your gross qualifying income (before expenses) from self-employment, rental property, or a combination of both exceeded £50,000 in the 2024/25 tax year.
It is your gross income that matters — not your profit. A sole trader with £55,000 turnover and £20,000 expenses is still caught by MTD even though their taxable profit is only £35,000.
The threshold reduces further in April 2027 — anyone with qualifying income over £30,000 in 2025/26 will be required to comply. A further extension to £20,000 has been announced but is not yet legislated.
What Does MTD for ITSA Actually Require?
MTD for ITSA replaces the annual Self Assessment tax return with a system of quarterly digital updates. Here is what you must do:
1. Keep Digital Records
You must keep all income and expense records digitally, using HMRC-recognised MTD-compatible software. You cannot use spreadsheets alone unless they connect to HMRC via a bridging tool.
2. Submit Quarterly Updates
You must submit a summary of your income and expenses to HMRC every quarter. The quarterly periods and submission deadlines are:
| Quarter Period | Submission Deadline |
|---|---|
| 6 April – 5 July | 5 August |
| 6 July – 5 October | 5 November |
| 6 October – 5 January | 5 February |
| 6 January – 5 April | 5 May |
3. Submit an End of Period Statement
After the tax year ends, you confirm and finalise your income figures for each source of income in an End of Period Statement (EOPS).
4. Submit a Final Declaration
This replaces the traditional Self Assessment return and must be submitted by 31 January following the tax year end — the same deadline as before.
Which Software Qualifies?
HMRC maintains a list of recognised MTD-compatible software. Widely used options include QuickBooks, Xero, FreeAgent, Sage, and HMRC's own free bridging tools for those with simpler affairs. The software must be able to connect directly to HMRC's API to submit your quarterly updates.
If you are already using accounting software through Ledgertech, we will manage your MTD setup and quarterly submissions as part of your service. Contact us to confirm your arrangements.
What Records Must You Keep Digitally?
For each source of income, you must keep digital records of:
- All business income received
- All allowable business expenses incurred
- For property income: rental receipts, allowable expenses, and details of each property
- Any capital allowances claims
Bank statements alone are not sufficient. Records must be categorised by income and expense type.
Penalties for Non-Compliance
HMRC uses a points-based penalty system for late MTD submissions. Each missed quarterly update earns one penalty point. Once you reach a threshold of points (four for quarterly submissions), HMRC issues a £200 financial penalty. Points reset after a period of compliance.
Persistent non-compliance can result in escalating penalties. HMRC has made clear it intends to enforce MTD actively once the system is fully rolled out.
What Should You Do Now?
- Check whether your 2024/25 qualifying income exceeds £50,000
- If it does, speak to us immediately — you need to be set up before your first quarterly deadline
- If it does not, check whether your 2025/26 income is likely to exceed £30,000 — you may be in scope from April 2027
- Ensure you have MTD-compatible software in place and your records are being kept digitally from the start of the current tax year
For full details, see HMRC's published guidance at gov.uk/making-tax-digital-for-income-tax.
General information only. This article provides general guidance on UK tax and accounting matters and reflects our understanding of legislation and HMRC guidance at the time of publication. Tax rules, rates, and thresholds change frequently. Nothing in this article constitutes personalised tax or financial advice. Always seek advice specific to your circumstances from a qualified accountant before taking action. Ledgertech Accountants Ltd accepts no liability for any loss arising from reliance on this content.
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