Making tax digital for Income Tax

Making tax digital for income tax (MTD for ITSA)

Are you impacted by the MTD for ITSA changes?

The Government has recently announced phased mandating of Making Tax Digital for ITSA – also known as MTD for ITSA – effective from April 2026. If you have combined income from self-employment and/or property of over £50,000, prepare for quarterly updates, digital record-keeping, and a new penalty system.

Background to making tax digital

Making Tax Digital (MTD) is an HMRC initiative aimed at modernising the UK tax system by moving towards fully digital record keeping and tax submissions.

MTD for VAT became mandatory from April 2022 for all VAT registered businesses. This includes businesses above the VAT threshold (£90,000) and those who voluntarily register. These businesses must keep digital records and submit their VAT returns using HMRC recognised software (e.g. Xero, Quickbooks, Freeagent).

MTD for Income Tax Self Assessment (MTD ITSA) is the next phase of HMRC’s digital journey, which will affect sole traders and landlords. After some significant delays, this is now confirmed to take effect from April 2026.

MTD for other taxes – The government has no definitive timeline for the introduction of other taxes into MTD. However, announcements have been made that they remain committed to the introduction of MTD for Partnerships, and there has also been a consultation on MTD for Corporation Tax.

MTD For income tax self assessment (MTD ITSA)

In the Spring Statement 2025, the government confirmed a phased rollout of MTD ITSA for individuals with combined qualifying income from self-employment and/or property as follows:

From April 2026 – mandatory for those with income exceeding £50,000
From April 2027 – the rules will extend to those with income above £30,000
From April 2028 – further expansion to capture those with income above £20,000

The government will also continue to explore how to bring the benefits of MTD to those with income below the £20,000 threshold.
Under MTD ITSA, affected individuals will need to:

Keep digital records
Submit quarterly updates of income and expenditure to HMRC via approved software
File the end-of-year tax return through MTD compatible software

A new points based penalty system for late filing and late payment of tax will also be introduced, similar to the penalty system for VAT.

Some exemptions are available (e.g. for digitally excluded individuals), but these exemptions are unlikely to apply to the majority of tax payers.