From April 2026, the way self-employed people and landlords report income to HMRC changes permanently. Making Tax Digital for Income Tax; known as MTD ITSA, replaces annual Self Assessment for anyone with gross income above £50,000. It is the most significant shift in UK tax administration in a generation, and the deadline is closer than most people realise.
This guide covers everything you need to know: who is affected, what the new process looks like, the software you'll need, and the steps to take before the mandatory start date.
Making Tax Digital (MTD) is the government's programme to move the UK tax system online. You may already be familiar with MTD for VAT, which has been mandatory for most VAT-registered businesses since 2019. MTD for Income Tax; officially called MTD for Income Tax Self Assessment, or MTD ITSA, extends that same digital-first approach to income tax.
The core change: instead of filing one annual Self Assessment return, you'll submit quarterly digital updates to HMRC throughout the year, plus a year-end Final Declaration to confirm your figures.
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⚠️ MTD for Income Tax does NOT abolish your tax bill. The same tax is owed — what changes is how and when you report it to HMRC. |
Mandation is being rolled out in phases. The critical factor is your gross income — that is, total turnover before expenses — from self-employment and property combined.
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Date |
Who Is Affected |
What Changes |
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April 2026 |
Self-employed & landlords with gross income over £50,000 |
Quarterly digital updates mandatory. Annual Self Assessment replaced by Final Declaration. |
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April 2027 |
Self-employed & landlords with gross income over £30,000 |
Same requirements as April 2026 cohort. |
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TBC |
Those with gross income under £30,000 |
No confirmed mandation date. Voluntary sign-up available. |
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TBC |
Partnerships |
Excluded from current mandation plans. Watch for HMRC updates. |
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📌 The £50,000 threshold applies to gross income — your total turnover — not your net profit. A sole trader turning over £55,000 but making £20,000 profit is still in scope from April 2026. |
PAYE employees whose only income is their salary are not affected. MTD ITSA only applies where you have qualifying self-employment or property income.
The annual Self Assessment cycle you know — gather records, file by 31 January, pay by 31 January — is replaced by a continuous digital reporting process. Here is how it works:
Four times a year, you submit a digital summary of your income and expenses to HMRC. The quarterly periods align to the tax year:
These are updates, not full tax returns. You are not paying tax quarterly — you are simply reporting figures so HMRC can maintain a running estimate of what you owe.
After the tax year ends, you confirm your final income and expenses for each source — self-employment, property, or both — via an End of Period Statement. This replaces the detailed income sections of your current Self Assessment return.
The Final Declaration is the equivalent of today's Self Assessment tax return. You confirm all your income, claim any allowances or reliefs, and agree your tax liability. This must be submitted by 31 January following the end of the tax year — the same deadline you use today.
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💡 The 31 January payment deadline does not change. Tax remains payable on 31 January (and 31 July for payments on account). MTD changes reporting, not payment timing. |
You cannot use HMRC's own portal to meet MTD for Income Tax obligations. HMRC-recognised software is mandatory. Your records must be kept digitally and submitted directly from that software.
Accounted uses Xero, which is MTD-compatible and already used by thousands of UK businesses for Making Tax Digital for VAT. For clients on Accounted's books, this transition is managed for you.
Spreadsheets alone do not qualify. However, if you maintain records in Excel or Google Sheets, bridging software can connect your spreadsheet to HMRC's systems digitally. This is a compliant workaround, but not the most efficient one — purpose-built accounting software makes quarterly submissions significantly simpler.
MTD for Income Tax requires you to maintain digital records of:
HMRC does not specify a particular format beyond the requirement for digital storage and submission via approved software. Receipts and invoices can still be kept physically — it is the summary records that must be digital.
Exemptions are not automatic. You must apply to HMRC and have your case approved. Simply not wanting to go digital is not grounds for exemption.
If your income drops below £50,000 after you have entered MTD, you remain subject to MTD obligations for the full tax year in which you are enrolled. HMRC has confirmed that once mandated, you cannot exit MTD mid-year. Income below the threshold in a subsequent year may allow you to step back — but confirm this position with your accountant before assuming anything.
HMRC is introducing a points-based penalty system for MTD ITSA, replacing the current flat-fee late filing fines. Under this system:
The intention is to treat occasional lapses differently from persistent non-compliance. But do not mistake a more forgiving regime for a lenient one — cumulative penalties and HMRC interest on late payments still apply.
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⚠️ HMRC has confirmed a soft-landing period for the first year of MTD mandation, with penalties not charged during the 2026–27 tax year for late quarterly submissions. This does not extend to the Final Declaration. |
If you are in scope for April 2026 mandation, here is your action list:
MTD ITSA applies to property income as well as self-employment income. If you receive rental income and your total qualifying gross income — rent plus any self-employment — exceeds £50,000, you are in scope from April 2026.
Landlords with a single property who have always used Self Assessment to report rental income will find the quarterly reporting requirement a significant change. The record-keeping obligations are the same as for the self-employed: digital, categorised, and submitted via approved software.
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🏠 Joint property ownership requires each owner to report their share separately. If you and a partner jointly own a rental property, you each need to assess your own total qualifying income against the threshold independently. |
For Accounted clients, Making Tax Digital for Income Tax is handled as part of your ongoing service. We manage:
If you are approaching the £50,000 threshold or are unsure whether MTD applies to your situation, the best time to review it is now — before April, not after.
Does MTD for Income Tax replace Self Assessment completely?
For those in scope, yes — the annual Self Assessment return is replaced by quarterly updates, an End of Period Statement, and a Final Declaration. The Final Declaration covers the same ground as your current return, but the process is spread across the year rather than completed in one annual filing.
My gross income is £51,000 but my profit is only £18,000. Am I still affected?
Yes. The threshold is based on gross income — total turnover before any expenses are deducted. A gross income of £51,000 brings you into scope from April 2026, regardless of your profit margin.
Can I continue using my accountant for MTD submissions?
Yes. Your accountant can be authorised to submit on your behalf through their agent software. The legal obligation to submit accurately and on time remains yours, but the practical responsibility can be fully delegated to your accountant.
What if I miss a quarterly deadline?
Under the new points-based system, one missed deadline earns one penalty point. You only incur a financial penalty once your points reach a cumulative threshold (four points for quarterly filers). During 2026–27, HMRC has announced a soft-landing period — penalty points for late quarterly submissions will not convert to financial penalties in the first year.
I file Self Assessment for multiple income sources — employment, freelance, and rental. Does MTD cover all of them?
MTD ITSA covers self-employment and property income. Employment income (PAYE) is reported by your employer and does not require quarterly updates. Your Final Declaration will still bring together all your income sources — employment income is included there, just as in the current Self Assessment process.
I am below £50,000 now. Should I do anything?
If your income is below £50,000 and shows no sign of crossing that line, you have no immediate obligation. However, if you are growing, it is worth monitoring closely — mandation applies from the tax year in which your income exceeds the threshold. Voluntary sign-up is available now if you want to get ahead of it.
Is there any penalty for signing up to MTD voluntarily before it is mandatory?
No. Voluntary sign-up carries no penalty and can be a sensible move if it gives you time to adapt your record-keeping before the mandatory date. Speak to your accountant before signing up voluntarily to ensure your software and processes are ready.
What is the difference between MTD for VAT and MTD for Income Tax?
MTD for VAT (in place since 2019) applies to VAT-registered businesses and requires digital VAT records and digital submission of VAT returns. MTD for Income Tax is a separate regime that applies to individuals with self-employment or property income. Being compliant with MTD for VAT does not mean you are automatically enrolled in MTD for Income Tax.
Not sure if MTD applies to you?
Book a free consultation with Accounted. We'll review your income position, confirm your obligations, and handle everything from setup to submission.