Sarah Bradford explains how traders and landlords can work out their making tax digital for income tax self-assessment start date, and what they need to do to comply.
Making tax digital for income tax self-assessment (MTD for ITSA) is introduced progressively from 6 April 2026. Individuals within its scope will need to keep digital records and make quarterly returns and a final declaration to HMRC using MTD-compatible software. It will apply to individuals with unincorporated trading or property businesses in excess of the threshold.
Once an individual is within MTD for ITSA, they remain in it unless their income drops below the prevailing threshold for three consecutive tax years.
Start date 1: 6 April 2026
The first start date is 6 April 2026. MTD for ITSA will apply to traders and landlords with trading or property income of £50,000 or more. It is important to note that the relevant figure is their combined trading and property income – if this is more than £50,000, the individual will need to comply with MTD for ITSA from 6 April 2026.
The relevant income is trading and rental income, before the deduction of expenses. Trading and rental income for 2024/25 is used to determine whether an individual is within MTD for ITSA for 2026/27. As the 2024/25 tax year has now ended, individuals with trading and or property income will be able to work out whether MTD for ITSA will apply to them from 6 April 2026.
Example 1: Over the limit
Frank is a sole trader. In 2024/25, his trading income before the deduction of expenses was £75,000.
As this exceeds the MTD for ITSA threshold for 2026/27 of £50,000, he must comply with MTD for ITSA from 6 April 2026.
Example 2: Trading and property income
Gail is a sole trader. In 2024/25, her trading income before the deduction of expenses was £35,000. She also has two rental properties which she lets out and from which she received rental income of £22,000 (before deduction of expenses) in 2024/25.
Although neither her trading income nor her property income individual exceeds £50,000, as her combined trading and property income of £57,000 is in excess of the MTD for ITSA threshold, she must comply with MTD for ITSA from 6 April 2026 onwards.
Start date 2: 6 April 2027
The MTD for ITSA trigger threshold drops to £30,000 from 6 April 2027. Individuals with trading or property income of £30,000 or more (based on 2025/26) who are not already within MTD for ITSA will need to comply from 6 April 2027 onwards.
Again, it is important to note that it is the total from all trading and property businesses, rather than the income for each individual business, that determines whether the individual is within MTD for ITSA.
Example 3: A tale of two businesses
Husain runs two small businesses. The trading income from one business is £25,000, while his trading income from his other business is £11,000.
As his total trading income is £36,000, if it remains at this level, he will need to comply with MTD for ITSA from 6 April 2027.
Start date 3: 6 April 2028
At the time of the 2025 Spring Statement, it was announced that MTD for ITSA will be extended to individuals with trading or property income of £20,000 or more from April 2028.
Individuals whose combined trading and personal income is at least £20,000 and who are not already within MTD for ITSA must comply from that date.
Example 4: Forecasted joining date
Inge is employed as a management consultant. She also has a holiday property which she lets out, generating rental income of around £22,000 a year.
If her rental income remains at that level, she will need to join MTD for ITSA from 6 April 2028.
Source MTD for ITSA software
MTD for ITSA requires individuals to keep digital records of their trading and property income and expenses, and also to make quarterly returns to HMRC and a final declaration using software that is compatible with MTD for ITSA.
If individuals are to meet their MTD for ITSA obligations from their start date, they will need to have software in place by then. The first start date is less than a year away.
Compatible software will enable you to:
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create and store digital records of income and expenses in the correct format;
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make quarterly returns of income and expenses to HMRC;
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make the final declaration to finalise the tax position for the tax year; and
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receive information from HMRC, such as tax estimates.
You can either opt for a single product that will meet all their requirements under MTD for ITSA, or more than one product which together meet the requirements. Some packages will let you create a digital record of your income and expenses, for example, by manually entering the information into the software. Alternatively, the software may connect to your online bank account.
If you currently use spreadsheets to keep your business records, you will still be able to do so. You will need to connect your spreadsheets with bridging software which works with MTD for ITSA and allows you to submit your digital returns to HMRC. The information must be transferred digitally from the records to the returns – it must not be entered manually. The software must also be capable of making submissions to HMRC so that you can submit your quarterly returns and final declaration.
HMRC has indicated that free software will be made available, which can be used by those with the most straightforward affairs. However, if you have more complex affairs, you will need to use commercial software. HMRC publishes a list of commercial software that is MTD-compliant. The list can be found at: www.gov.uk/guidance/find-software-thats-compatible-with-making-tax-digital-for-income-tax.
Need to keep digital records
One of the key elements of MTD for ITSA is the need to keep digital records for trading and property income and expenses. You will need to record each individual transaction in your digital records; this should include the date and the amount of the transaction and the nature of that transaction.
As far as is practicable, records should be kept in real time to reduce errors. You can either use software designed for this purpose or you can keep your records in a spreadsheet and use bridging software to link to your quarterly returns.
Quarterly returns
Instead of providing details on income and expenses to HMRC after the end of the tax year on the self-assessment tax return, individuals within MTD for ITSA will instead provide information progressively throughout the tax year on quarterly returns, which must be filed using MTD-compatible software.
The quarterly returns are simple summaries of the income and expenses which are generated from the digital records. There is no need to make accounting adjustments – this is done at the end of the tax year. The figures submitted each quarter are the cumulative figures for the year to date. This allows corrections to be made for previous quarters without having to resubmit the information for those quarters.
The quarters run to 5 July, 5 October, 5 January and 5 April, although taxpayers can report to calendar quarters instead (30 June, 30 September, 31 December and 31 March). The deadlines for submitting the quarterly returns are 7 August, 7 November, 7 February and 7 May.
Final declaration
Individuals within MTD for ITSA are not required to file a tax return after the end of the year. Instead, they must send a final declaration to HMRC using MTD-compatible software. Other income outside of MTD for ITSA is reported on the final declaration (e.g., investment income). Claims for reliefs and allowances are also made in the final declaration.
The individual must also declare that the information provided is complete and correct to the best of their knowledge and belief.
Payment of tax
MTD for ITSA does not change the underlying tax rules or the dates by which tax must be paid.
Payments on account (where required) will continue to be paid on 31 January in the tax year and 31 July after the tax year, with any balance due by 31 January after the end of the tax year.
Practical tip
It is advisable to work out your MTD for ITSA start date sooner rather than later to allow you time to prepare. If you have an April 2026 start date, now is the time to start looking at software options to find a package that meets your needs.
