MTD for ITSA 2026: Key Changes You Need to Know About Making Tax Digital

From April 2026, the UK tax system enters a new digital era. Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) will become mandatory for sole traders and landlords with annual income above £50,000.

This reform does not eliminate the yearly process entirely but adds new layers to it. Instead of submitting just one annual Self Assessment return, affected taxpayers will need to keep digital records, file quarterly updates during the year, and still complete year-end submissions in the form of an End of Period Statement and a Final Declaration. If your income is above the qualifying threshold, it is vital to start preparing now.

In this guide, we explore the MTD 2026 changes, explain who is impacted, outline practical steps for compliance, and highlight why some may want to sign up early on a voluntary basis.

What is Making Tax Digital for Income Tax Self Assessment?

Making Tax Digital for Income Tax Self Assessment is part of HMRC’s long-term strategy for income tax digitalisation in the UK. Its purpose is to simplify tax reporting, cut down on avoidable errors, and provide taxpayers with a clearer, more up-to-date view of their tax position.

Under the new rules, taxpayers must:

• Keep digital business and property income and expenses records.

• Submit quarterly updates to HMRC: every three months, taxpayers must send a summary of their total income and expenses for that period, rather than individual transaction records. These updates provide HMRC with an estimate of tax owed but do not replace the need for year-end adjustments.

• File an End of Period Statement (EOPS) and a Final Declaration to confirm total liabilities at the year’s end.

MTD 2026 Changes: Who Will Be Affected?

The rollout of MTD for ITSA is staggered, starting with higher earners.

• From 6 April 2026, sole traders and landlords with total income above £50,000 will be required to follow the MTD system.

• From April 2027, the threshold will extend to those with income between £30,000 and £50,000.

• From 6 April 2028, it extends further to individuals with qualifying income above £20,000.

• At present, anyone earning below £20,000 is outside the scope.

This means that milion of small business owners and landlords will need to switch to digital tax reporting two years earlier than many expected.

MTD Income Tax 2026: What Will Change in Practice?

Here are the main differences compared to the current Self Assessment process:

• Digital records must be kept using HMRC-approved software (for example, EasyInvoice). Handwritten notes or informal records in a private notebook are no longer sufficient. Spreadsheets can still be used, but only if they are linked to HMRC through bridging software.

• Quarterly updates will be required in addition to the annual tax return, giving HMRC regular insight into your business or rental income throughout the year.

• An End of Period Statement will allow for year-end adjustments, such as allowances and reliefs.

• A Final Declaration will replace the annual Self Assessment, combining all income sources into one digital filing.

• MTD-compatible software is mandatory – whether a cloud-based accounting tool or a bridging solution linked to spreadsheets.

MTD for Landlords 2026: Key Considerations

Landlords will also be included in Making Tax Digital for Income Tax Self Assessment once their qualifying income reaches the threshold. According to HMRC guidance:

• Property income reporting must be digital: landlords with income above the threshold will need to keep digital records of their rental income and submit quarterly updates using MTD-compatible software.

• Jointly owned property: each co-owner is responsible for reporting their own share of rental income and expenses under MTD rules.

HMRC makes clear that it is the individual’s qualifying income that determines whether they must join MTD for ITSA. For landlords, this means looking at the total gross rental income (alongside any sole trade income) to assess whether the threshold is met.

Voluntary Sign Up: Try Before It Becomes Mandatory

Not yet required to join? HMRC allows voluntary participation in MTD for ITSA before your official start date.

By opting in early, you can:

• Familiarise yourself with the quarterly reporting routine without penalty pressure.

• Test different software solutions to see what works best for your needs.

• Build confidence in digital record-keeping long before the MTD ITSA deadline applies.

While you’ll still be submitting quarterly updates, HMRC does not currently issue late-filing penalties for volunteers who miss deadlines during the trial phase. This makes early enrolment a low-risk way to adapt to the system.

MTD ITSA Deadline: Preparing for April 2026

Here’s how to get ready for the switch:

• Check your income threshold: If your combined trading and property income exceeds £50,000, you’re in the 2026 group.

• Select compliant software: Review HMRC’s list of approved providers and choose one that fits your needs.

• Transition to digital records: Shift from manual bookkeeping to electronic record-keeping now to avoid last-minute pressure.

• Check whether your agent is MTD-ready: you may want to confirm that your accountant or tax agent can support you under the new rules. However, if you choose a simple, user-friendly app like EasyInvoice, you may find you don’t need an agent at all. Managing MTD can be as straightforward as adding your income and expense records, and every four months submitting a quarterly update. Worried you might forget? EasyInvoice will remind you!

• Practise quarterly submissions: Even before it’s mandatory, simulate the process or join voluntarily to smooth the transition.

Income Tax Digitalisation UK: Opportunities and Challenges

Benefits

• Real-time visibility: quarterly updates provide a clearer picture of your tax position throughout the year.

• Fewer errors: digital submissions reduce mistakes compared to manual record-keeping.

• Better financial planning: more frequent reporting supports improved cashflow management.

Challenges

• Software subscription costs: while there is a cost for MTD-compatible software, for many sole traders and landlords this may still be cheaper than relying on a traditional accountancy service.

• Adapting to new tools: taxpayers unfamiliar with digital systems may need time to get comfortable.

• Compliance pressure: once fully enforced, late or inaccurate quarterly submissions can result in penalties.

Conclusion: Making Tax Digital for Income Tax Self Assessment

The MTD 2026 changes mark a decisive step in the UK’s journey toward income tax digitalisation. For sole traders and landlords earning above £50,000, April 2026 is not far off.

Preparing early – by choosing software, switching to digital record-keeping, and even signing up voluntarily – will help you avoid disruption when the MTD ITSA deadline arrives.

The digital future of tax reporting is on its way. Taking action now ensures you’re ready to meet it with confidence.