Making Tax Digital for Income Tax (MTD for ITSA) is now mandatory for UK sole traders and landlords earning over £50,000 per year. From 6 April 2026, the traditional annual Self Assessment tax return has been replaced with a new system of digital record-keeping and quarterly submissions to HMRC. This guide explains everything you need to know — what's changed, who's affected, what the deadlines are, and how to comply without paying hundreds of pounds for accounting software.
Key context: From April 2026, 864,000 UK sole traders and landlords with income over £50,000 must keep digital records and file quarterly updates to HMRC. Penalties apply from the second tax year. See how VoxaMTD makes compliance simple — free HMRC-recognised software with open banking, AI categorisation, and one-click submissions.
What is Making Tax Digital for Income Tax?
Making Tax Digital for Income Tax (MTD for ITSA) is HMRC's new digital tax reporting system that replaces the annual Self Assessment return for most sole traders and landlords. Instead of submitting one tax return per year, you now need to keep digital records throughout the year and send HMRC quarterly updates of your income and expenses, followed by a final year-end declaration.
The system does not change how much tax you pay or when you pay it. Tax payments still follow existing Self Assessment timelines — 31 January and 31 July. What changes is how and how often you report your financial activity to HMRC.
MTD is part of HMRC's long-term programme to modernise the UK tax system and reduce the £9 billion tax gap caused by errors in Self Assessment returns.
Who needs to comply with MTD in 2026?
MTD for Income Tax is being rolled out in phases based on income:
Phase 1 — From 6 April 2026: Sole traders and landlords with combined gross income from self-employment and property exceeding £50,000 must comply. Only 21% of affected taxpayers had registered by the week before the deadline, according to Thomas Coombs Accountants — meaning many are only just beginning to set up. Phase 2 — From April 2027: The threshold drops to £30,000, bringing significantly more taxpayers into scope. Phase 3 — From April 2028: The threshold drops again to £20,000, meaning the vast majority of UK sole traders and landlords will eventually be required to use MTD.The threshold is based on gross income before expenses, not profit. If your self-employment turnover is £35,000 and your rental income is £20,000, your combined qualifying income is £55,000 — putting you in scope from April 2026 even if your actual profit is much lower.
Only 30% of sole traders have a clear understanding of what MTD for Income Tax involves, according to research by IPSE and Sage. The remaining 70% either haven't heard of it or don't realise it requires quarterly submissions.
What are the MTD quarterly deadlines?
Under MTD, you submit five reports per year instead of one:
| Period | Deadline |
|---|---|
| 6 April – 5 July 2026 | 7 August 2026 |
| 6 July – 5 October 2026 | 7 November 2026 |
| 6 October – 5 January 2027 | 7 February 2027 |
| 6 January – 5 April 2027 | 7 May 2027 |
| Final Declaration (year-end) | 31 January 2028 |
Alternatively, you can opt for calendar quarter periods ending on the last day of each month (31 July, 31 October, 31 January, 30 April), with deadlines one month and seven days after each period end.
What do quarterly updates include?
A quarterly update is a summary of your business income and expenses for that three-month period. It is not a tax calculation — HMRC uses the data to maintain an ongoing picture of your financial activity, but no tax payment is triggered by a quarterly submission.
For sole traders, this means reporting your business income and allowable expenses each quarter. For landlords, this means reporting gross rental income and property expenses. If you own multiple properties, all UK property income is reported as a single quarterly submission.
Quarterly updates are cumulative — if you make an error in Q1, you can correct it in Q2 without needing to amend the previous submission.
What software do you need for MTD?
You must use HMRC-recognised software to keep digital records and submit quarterly updates. Spreadsheets alone are not sufficient unless linked to MTD-compatible bridging software.
The main options are:
- Full accounting software (Xero from £16/month, QuickBooks from £10/month, FreeAgent free with certain bank accounts, Sage from £7/month) — handles records, bank feeds, invoicing, and MTD submissions in one place
- Bridging software (VitalTax from £36/year) — connects your existing spreadsheet to HMRC, letting you keep your current workflow while meeting MTD requirements
- Free MTD software (VoxaMTD — free) — handles quarterly MTD submissions, AI-powered transaction categorisation, open banking bank feeds, and a live tax estimate, with no subscription fee
What if you miss a deadline?
During 2026/27, HMRC has confirmed there will be no penalty points for missed quarterly updates. This is a one-year transitional period to allow new users to adjust.
The Final Declaration (year-end submission) still carries penalties during 2026/27. From 2027/28, the full points-based system applies to all submissions: each missed submission earns one penalty point, and four points trigger a £200 charge.
HMRC has also introduced a proportionate late payment penalty system based on how long tax remains unpaid.
Can you still use a spreadsheet?
Yes — but only if your spreadsheet is linked to HMRC-compatible bridging software. You cannot submit directly from Excel or Google Sheets. The bridging software reads your figures and submits them to HMRC in the required format.
If you prefer to stay with a spreadsheet-based workflow, VitalTax (from £36/year) is the most widely used bridging tool for MTD Income Tax.
Frequently asked questions about Making Tax Digital
Does MTD change how much tax I pay? No. MTD changes how and when you report income to HMRC. Your tax liability is still calculated on annual profits, and payment deadlines remain 31 January and 31 July. Do quarterly updates replace my tax return? Not entirely. The Final Declaration at year-end replaces the traditional Self Assessment return. Quarterly updates are additional interim reports. What happens if my income drops below the threshold? Once you join MTD, HMRC's guidance should be checked to confirm ongoing obligations. Entry is based on qualifying income from a previous tax year. Are partnerships included in MTD from 2026? No. MTD for partnerships will be introduced at a later date. Partnerships continue to file Self Assessment returns for now. Is VoxaMTD free for MTD? Yes. VoxaMTD's core tier is completely free and covers all MTD submission requirements, including quarterly updates and the final declaration, with FCA-regulated open banking through Finexer and AI-powered transaction categorisation. Is VoxaMTD HMRC-recognised? Yes. VoxaMTD is an HMRC-recognised MTD software provider connected to HMRC's production API.How to get started with MTD right now
- Check your threshold — Review your 2024/25 gross income from self-employment and property. If combined it exceeds £50,000, you must comply from April 2026.
- Sign up with HMRC — Register for MTD Income Tax Self Assessment through HMRC's online service before your first quarterly deadline (7 August 2026).
- Choose your software — Select HMRC-compatible software and connect your bank account.
- Start keeping digital records — Record income and expenses throughout the quarter, not in a January rush.
- Submit your first quarterly update — Due by 7 August 2026 for the period 6 April to 5 July 2026.
Related resources
This article is for general guidance only and does not constitute professional tax advice. For complex situations, consult a qualified accountant.