MTD for ITSA (Making Tax Digital for Income Tax Self Assessment) has applied since 6 April 2026 to sole traders and landlords whose qualifying income was over £50,000 in 2024/25, and it reaches those over £30,000 from April 2027 and over £20,000 from April 2028. Affected clients keep digital records, send four cumulative quarterly updates through compatible software and file a tax return by 31 January. For practices, one annual job has become five submissions per client.
MTD for ITSA requires sole traders and landlords above an income threshold to keep digital records and report to HMRC quarterly using software. The threshold is gross self-employment and property income: £50,000 from April 2026, £30,000 from April 2027 and £20,000 from April 2028 (GOV.UK).
Key points
- Qualifying income is turnover before expenses from self-employment and property, taken from an earlier year’s return (GOV.UK: work out qualifying income).
- Quarterly updates are due on 7 August, 7 November, 7 February and 7 May, and each one covers the year to date.
- No penalty points for late quarterly updates in 2026/27; late returns and late payment are still penalised.
- Some people are automatically exempt, including those without a National Insurance number and trustees.
- The workload is mostly chasing and categorising records four times a year, which a support team can run under your review.
Terms used in this guide
- Qualifying income: total gross income from self-employment and property, before expenses, used by HMRC to decide whether and when someone joins.
- Digital records: a record of each transaction’s amount, date and category kept in software or in spreadsheets digitally linked to software.
- Quarterly update: a summary of income and expenses sent from software after each update period. It is not a tax calculation the client signs off.
- Tax return: the end-of-year submission, still due by 31 January, where adjustments, reliefs and other income are added. Older guides call it the final declaration.
- Agent services account: the HMRC account agents use to sign clients up and act for them in MTD for ITSA.
Who has to use MTD for ITSA, and when
HMRC looks at the Self Assessment return for an earlier tax year to decide the start date. The table shows the three cohorts on GOV.UK.
| Qualifying income over | Measured on | Must use MTD for ITSA from |
|---|---|---|
| £50,000 | 2024/25 return | 6 April 2026 |
| £30,000 | 2025/26 return | 6 April 2027 |
| £20,000 | 2026/27 return | 6 April 2028 |
The practical consequence is that the 2025/26 returns your team files this winter decide who joins in April 2027. Flag every client between £30,000 and £50,000 as you file, so sign-up and software set-up can start in February rather than April.
What counts towards qualifying income
GOV.UK says qualifying income is turnover from self-employment plus gross property income, with only the client’s share of jointly owned property counted. Employment income, dividends, pensions and a partner’s share of partnership profit do not count. A client with £25,000 of rent and £27,000 of self-employed turnover has £52,000 of qualifying income, even if their profit is far lower. This is the point clients most often get wrong, because they think in profit.
Exemptions from MTD for ITSA
Some people are automatically exempt and need do nothing. GOV.UK lists, among others, people without a National Insurance number, trustees (including charitable trustees), personal representatives of someone who has died, Lloyd’s members for their underwriting business, and people who cannot manage their affairs and have a power of attorney or a court-appointed deputy acting for them (GOV.UK: exemptions).
Others can apply, most commonly because they are digitally excluded: it is not reasonably practical for them to use software because of age, disability, location or religious belief. Partnerships are not yet in scope. Record each client’s exemption reason and evidence on file, because the question will come back every year.
What MTD for ITSA changes for clients
The table compares the old annual cycle with the MTD for ITSA cycle for a client in the April 2026 cohort.
| Task | Before MTD | Under MTD for ITSA |
|---|---|---|
| Record keeping | Any format, often paper or year-end spreadsheets | Digital records of amount, date and category for each transaction |
| Reporting during the year | None | Four cumulative quarterly updates per business |
| Deadlines during the year | Payments on account only | 7 August, 7 November, 7 February, 7 May |
| Year-end submission | Self Assessment return by 31 January | Tax return through software by 31 January |
| Record retention | At least 5 years after 31 January deadline | Digital records for at least 5 years after the 31 January deadline |
GOV.UK’s digital records guidance allows spreadsheets if they are digitally linked to bridging software, through linked cells, CSV or XML imports, or an API. Retailers can record daily gross takings, and businesses with turnover below £90,000 can use simpler categories. Once a record has been sent in an update, it must not be moved manually between systems.
For the practice, the shift is from one heavy annual contact to five lighter ones. Each quarter brings the same questions: are the bank feeds connected, are receipts uploaded, is anything uncategorised, and has the right income gone to the right business or property? The quarterly update itself takes minutes once those answers are in. Getting the answers is where the time goes.
The quarterly dates themselves, standard and calendar periods, and a month-by-month chase calendar are in our guide to MTD quarterly deadlines for 2026/27.
Penalties under MTD for ITSA
MTD for ITSA uses a points-based system for late submissions. Each missed deadline earns a point, and at four points a £200 penalty is charged, with £200 more for each further miss. HMRC has said there are no penalties for missing a quarterly update deadline in 2026/27, though the updates must still be sent before the return (GOV.UK: penalties).
Late payment penalties apply from the first year. For 2026/27, tax unpaid at day 15 attracts 3%, a further 3% at day 30 and 10% a year from day 31. From 2027/28 the first two charges rise to 4%. If a client is already facing a penalty, our guide to appealing HMRC penalties covers reasonable excuse and the appeal routes.
Five steps to manage the MTD for ITSA workload
The extra work is not the submission itself. It is the chasing, categorising and correcting before each quarter. These five steps redesign the process once instead of repeating a scramble four times a year.
- Segment the client list. Tag every sole trader and landlord as in the 2026 cohort, the 2027 cohort, the 2028 cohort, exempt or out of scope, using gross figures from the latest return.
- Check authorisations. Confirm each client appears in your agent services account; existing Self Assessment authorisations are recognised, but add any missing ones (GOV.UK: sign up your client).
- Standardise software. Choose from HMRC’s list of software that works with MTD for Income Tax and keep the number of products your team supports small.
- Run a chase calendar. Request bank feeds and receipts before each period ends, not after.
- Split preparation from review. Support staff reconcile, categorise and prepare; the responsible accountant reviews and submits under the practice’s credentials.
Steps 1 and 2 are covered in detail in our MTD client onboarding checklist, and clean bank reconciliations make step 4 much faster; see our time audit of bank reconciliation and payroll prep.
In-house, outsourced or hybrid?
- In-house: full control, but recurring admin lands on accountants and bookkeepers in the same weeks as other deadlines, especially January.
- Outsourced: a support team handles data collection, reconciliation and preparation inside your software, freeing qualified staff for review and advice.
- Hybrid: the common model, where routine quarterly admin goes out and review, client conversations and submission stay in-house.
If you are pricing the options, our guide to outsourcing costs for accountants compares the employer on-costs of a hire with outsourced support.
FAQs
What does MTD for ITSA stand for?
MTD for ITSA stands for Making Tax Digital for Income Tax Self Assessment. It is HMRC’s programme requiring sole traders and landlords above an income threshold to keep digital records and send quarterly updates and their tax return through compatible software. GOV.UK now calls it Making Tax Digital for Income Tax.
Is MTD for ITSA mandatory from April 2026?
Yes, for sole traders and landlords whose qualifying income in 2024/25 was over £50,000, unless they are exempt. The threshold falls to £30,000 from 6 April 2027, measured on the 2025/26 return, and to £20,000 from 6 April 2028. People below the thresholds can volunteer.
Is qualifying income before or after expenses?
Before expenses. GOV.UK defines qualifying income as total turnover from self-employment plus gross property income, counting only the client’s share of jointly owned property. Employment income, dividends, pensions and partnership profit shares are excluded. A client with modest profits can still be in scope if turnover is high.
Can clients still use spreadsheets under MTD for ITSA?
Yes, if the spreadsheet is digitally linked to bridging software that sends the updates to HMRC. Links can be formulas, CSV or XML imports, or an API transfer. Retyping figures from one system into another is not allowed once records have been submitted, so check how each spreadsheet client moves their data.
What is the digital handshake?
It is the online authorisation an agent requests from the agent services account and the client accepts, which links the client to the agent for services such as VAT and Making Tax Digital for Income Tax. HMRC’s agent authorisation guidance lists the services it covers.
Can more than one agent act for an MTD for ITSA client?
Yes. A client can have one main agent and supporting agents. GOV.UK says main agents can handle everything up to and including the tax return, while supporting agents can keep records and send quarterly updates but cannot file the return. This suits a client whose bookkeeper sends the quarterly updates while the practice prepares and files the year-end return.
Get the quarterly admin off your seniors’ desks
Virtual Service Assists works inside your software and portals to chase records, reconcile bank feeds and prepare quarterly updates for your review. Submission stays under your agent credentials. See our MTD for ITSA support for accountants, or book a consultation to map your client list to the 2026 and 2027 cohorts.
