Making Tax Digital for Income Tax (MTD ITSA): What Self-Employed Individuals and Landlords Need to Know

At a glance: 

• What Making Tax Digital for Income Tax is 

• Who will be affected and when 

• How the new reporting process will work 

• Digital software options, including FreeAgent 

• What you should be doing now 

• How we can support you 

The way income tax is reported to HMRC is changing, and for many self-employed individuals and landlords, these changes will soon become a reality. 

From 6 April 2026, HMRC will introduce Making Tax Digital for Income Tax Self Assessment (MTD for ITSA). While the name may sound daunting, the intention is clear: to modernise the tax system and move away from once-a-year reporting towards a more regular, digital approach. 

This article explains who is affected, what will change, and how we will support you through the transition. 

What is Making Tax Digital for Income Tax? 

MTD for ITSA replaces the traditional annual Self Assessment process with a system based on: 

• Digital record keeping 

• Quarterly reporting of income and expenses 

• A final year-end declaration 

Rather than submitting everything once a year, taxpayers within scope will keep their records digitally and provide HMRC with regular updates throughout the tax year. 

Who Will Be Affected and When? 

MTD for ITSA will be introduced in phases: 

• From 6 April 2026 Self-employed individuals and landlords with qualifying income over £50,000 per year 

• From 6 April 2027 Threshold reduces to £30,000 

• From 6 April 2028 (currently proposed) Threshold expected to reduce to £20,000 

What counts as “qualifying income”? 

The threshold is based on gross income (turnover), not profit. It includes: 

• Self-employment income 

• Rental and property income (UK and overseas) 

Employment income, dividends, and capital gains are not included. 

If you have more than one source of business or property income, these figures are added together when assessing whether you exceed the threshold. 

Example: John is self-employed and earns £30,000 from his trade. He also receives £25,000 in rental income from a property he owns. Although neither source exceeds £50,000 on its own, John’s combined qualifying income is £55,000, meaning he will fall within the scope of MTD for ITSA from April 2026. 

What Will Change in Practice? 

If you fall within the scope of MTD for ITSA, you will be required to: 

1. Keep Digital Records 

You must maintain accounting records using HMRC-approved software from the start of the tax year. 

2. Submit Quarterly Updates 

You will submit four quarterly updates each year. These are summaries of income and expenses, submitted on a cumulative basis. 

The standard deadlines are: 

• 7 August 

• 7 November 

• 7 February 

• 7 May 

These updates are not tax calculations — they are simply regular snapshots of your business activity. 

3. Complete a Final Declaration 

You will still submit a final declaration at the end of the tax year, with adjustments made at this stage. The deadline remains 31 January, as it does now. 

Digital Software: A Practical and Cost-Effective Option 

MTD for ITSA requires the use of compatible accounting software, but this does not necessarily mean increased costs. 

One software option is FreeAgent - an HMRC-recognised cloud accounting platform that: 

• Records income and expenses digitally 

• Organises records throughout the year 

• Produces information needed for quarterly updates 

Importantly, FreeAgent is available free of charge to clients who hold a Mettle and NatWest business bank account . As long as the account remains active, there is no subscription fee. 

We can advise whether FreeAgent is suitable for your circumstances and assist with setup and compliance. 

What About Penalties? 

HMRC will operate a points-based penalty system, similar to Making Tax Digital for VAT. Penalties are only charged once a points threshold is reached. 

HMRC has indicated it intends to take a supportive and proportionate approach as taxpayers move into the new system, but MTD for ITSA will be a legal requirement for those within scope. 

How We Will Support You 

We are fully preparing to support clients through MTD for ITSA and will offer a comprehensive compliance service, including: 

• Software advice and setup 

• Digital record-keeping support 

• Quarterly submissions to HMRC 

• Final year-end declarations 

• Ongoing guidance throughout the year 

Fees will reflect the additional work involved and will be agreed in advance. 

What Should You Do Now? 

With MTD for Income Tax approaching in April 2026, now is the right time to start preparing. 

We recommend those affected begin to: 

• Consider suitable accounting software and begin setup where appropriate 

• Review current record-keeping practices and move towards digital records 

• Ensure bank accounts and information are up to date for digital integration 

Early preparation will help ensure a smooth and stress-free transition. 

Final Thoughts 

Making Tax Digital for Income Tax represents a significant change in how tax information is reported. With the right systems and professional support in place, the transition does not need to be disruptive. 

We can help you to ensure the move to MTD is smooth, compliant, and well-managed, allowing you to focus on running your business while we manage the reporting obligations. 

If you have any questions or would like to discuss how these changes may affect you, please do not hesitate to get in touch.