Making Tax Digital (MTD) is transforming the way individuals and businesses keep their records and submit tax returns. If you're self-employed or a landlord, you've probably heard of MTD for VAT, but the next stage – MTD for Income Tax Self Assessment (MTD ITSA) – is now on the horizon. Here’s what it means for you and how to prepare.
What is MTD for Income Tax?
MTD for Income Tax is part of the UK government's plan to modernise the tax system. It means that instead of submitting a single annual Self Assessment tax return, individuals will:
Keep digital records of income and expenses.
Send quarterly updates to HMRC via compatible software.
Submit a final declaration at the end of the tax year.
This is aimed at improving accuracy, reducing tax errors, and making it easier for people to manage their finances in real time.
Who Will Be Affected?
From April 2026, MTD for Income Tax will apply to:
Sole traders and landlords with combined business and/or property income over £50,000.
From April 2027, it will extend to those with income over £30,000.
Eventually, it may apply to partnerships and smaller earners, but HMRC hasn’t confirmed those timelines yet.
What Changes Under MTD ITSA?
If you’re used to filing a Self Assessment return once a year, MTD will be a significant shift. You’ll need to:
Use MTD-compatible software to keep digital records – spreadsheets alone won’t be enough unless they link to bridging software.
Submit updates every quarter showing your income and expenses.
Provide an end-of-period statement (EOPS) after the tax year ends, adjusting for things like allowances or reliefs.
Submit a final declaration confirming your total tax position for the year.
Benefits (and Realities)
The government promotes MTD as a way to help taxpayers stay on top of their finances, reduce errors, and avoid surprises at year-end. In theory, yes – you’ll have a clearer view of your tax bill throughout the year.
But let’s be honest – for many small business owners and landlords, it means more admin and a steeper learning curve.
How to Prepare
Check your income – If your gross income from self-employment and/or property is likely to be over £50,000 by April 2026, you’ll be in scope.
Talk to your accountant – They can help assess your readiness and recommend software that meets your needs.
Choose the right software – HMRC has a list of MTD-compatible software, including options designed for landlords and sole traders.
Start early – If you’re able to switch to digital record keeping now, you’ll be ahead of the curve when MTD becomes mandatory.
Final Thoughts
Change is coming – and while it may feel like a headache at first, good digital systems can save time in the long run. The key is to plan ahead, get support if needed, and avoid last-minute scrambles.
At Accounting for Good CIC, we support individuals and organisations with digital tax compliance – especially those with barriers to employment or running purpose-driven businesses. If you’d like to know more or need help getting ready for MTD ITSA, get in touch.