Making Tax Digital for Income Tax (MTD for ITSA) – Complete Guide for UK Businesses (2026 Update)
Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is a major change introduced by HM Revenue & Customs (HMRC) that will require individuals and landlords to manage their taxes digitally and submit updates more frequently.
This guide explains exactly what MTD for ITSA is, who it applies to, and how to prepare.
What is Making Tax Digital for Income Tax (MTD for ITSA)?
MTD for ITSA is a system introduced by HMRC requiring taxpayers to:
- Keep digital records of income and expenses
- Use MTD-compatible software
- Send quarterly updates and submit one annual tax return using compatible software. Quarterly updates do not replace the annual tax return.
The goal is to improve accuracy and make tax reporting more efficient.
Who Needs to Comply with MTD for ITSA?
MTD for Income Tax applies to sole traders and landlords in stages, depending on qualifying income. Qualifying income is total self-employment turnover and property income before expenses. The relevant tax year and start date are shown below. Exemptions may apply.
How Does MTD for ITSA Work?
You must keep digital records, send quarterly updates and submit one annual tax return using compatible software. Quarterly updates do not replace the annual tax return:
- Quarterly updates submitted to HMRC
- Digital record keeping throughout the year
- Annual tax return submitted using compatible software after checking the full year’s income, reliefs and allowances
What Software is Required for MTD?
You must use HMRC-approved accounting software such as:
- Xero
- QuickBooks
- Sage Accounting
Spreadsheets alone are not sufficient unless connected through bridging software.
When Does MTD for ITSA Start?
| Qualifying income | Relevant tax year | Start date |
|---|---|---|
| More than £50,000 | 2024 to 2025 | 6 April 2026 |
| More than £30,000 | 2025 to 2026 | 6 April 2027 |
| More than £20,000 | 2026 to 2027 | 6 April 2028 |
Benefits of Making Tax Digital
- Better visibility of your finances
- Reduced errors in tax submissions
- Improved cash flow management
- Easier collaboration with your accountant
Common Mistakes to Avoid
- Leaving preparation until the deadline
- Using non-compliant systems
- Failing to understand quarterly reporting
- Poor record keeping
How to Prepare for MTD for ITSA
- Check if your income meets the threshold
- Choose MTD-compatible software
- Start keeping digital records now
- Consult an accountant for guidance
How BNA Consulting Can Help
BNA Consulting supports businesses and individuals with:
- Setting up MTD-compliant systems
- Managing quarterly submissions
- Ensuring full HMRC compliance
- Providing ongoing tax support
If you are unsure about your readiness, professional guidance can help you avoid costly mistakes.
Frequently Asked Questions
What is MTD for ITSA in simple terms?
It is a system requiring individuals to keep digital records and submit tax updates quarterly.
Do I need MTD if I earn under £30,000?
It depends on your qualifying income and the relevant tax year. The threshold is more than £50,000 for a 6 April 2026 start, more than £30,000 for 6 April 2027 and more than £20,000 for 6 April 2028. See the table above for the tax year used for each threshold. Exemptions may apply.
Can I still file annually?
Yes. You must keep digital records, send quarterly updates and submit one annual Self Assessment tax return using compatible software. Quarterly updates do not replace the annual tax return.
Is MTD mandatory?
Yes, if you meet the income thresholds set by HMRC.