Making Tax Digital For Income Tax Self-Assessment: What You Need To Know

A Major Change Is Coming For Sole Traders & Landlords

If you're a sole trader or landlord, the way you report your income to HMRC is about to change significantly. Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) is being rolled out from April 2026, and if your qualifying income exceeds £50,000, the new rules already apply to you.

As trusted accountants in Kent, White & Co. Accounting are here to break down exactly what MTD for ITSA means, who it affects, what the deadlines are, and what you need to do to get ready.

What Is Making Tax Digital For
Income Tax?

Making Tax Digital for Income Tax Self-Assessment is a government scheme that changes how sole traders and landlords report their income and expenses to HMRC. Rather than filing a single annual Self-Assessment tax return, you will be required to keep digital records throughout the year and submit updates to HMRC every three months.

In practical terms, this means five submissions per year instead of one: four quarterly updates plus a final end-of-year Tax Return.

The scheme is being introduced in phases based on qualifying income:

• From 6 April 2026: sole traders and landlords with qualifying income over £50,000.
• From 6 April 2027: those with qualifying income over £30,000.
• From 6 April 2028: those with qualifying income over £20,000.

Your qualifying income is your gross income from self-employment and property combined, before any expenses are deducted.

The Key Dates & Deadlines

Getting to grips with the new deadlines is one of the most important steps. Here is what you need to know for the 2026/27 tax year:

• 6 April 2026: You must begin keeping digital records using compatible software.
• 7 August 2026: First quarterly update due, covering 6 April to 5 July 2026.
• 7 November 2026: Second quarterly update due, covering 6 April to 5 October 2026.
• 7 February 2027: Third quarterly update due, covering 6 April to 5 January 2027.
• 7 May 2027: Fourth quarterly update due, covering 6 April to 5 April 2027.
• 31 January 2028: Final Tax Return and income tax payment due for 2026/27.

It is worth noting that 31 January 2027 remains the deadline for submitting your standard Self-Assessment Tax Return for the 2025/26 tax year, which overlaps with the early MTD deadlines.

What About Penalties?

HMRC has confirmed a soft landing for those joining MTD in April 2026. For the first year, you will not receive penalty points for late submission of your four quarterly updates. However, penalties still apply to late Tax Returns, late payments, and poor record-keeping.

The late payment penalty structure works as follows:

• Interest is charged from day one.
• A 3% penalty applies after 15 days.
• A 6% penalty applies after 30 days.

For the first year only, you will have up to 30 days to pay or contact HMRC to arrange a Time to Pay agreement before penalties apply. Record-keeping failures can result in penalties of up to £3,000, although HMRC has indicated it will apply a reasonable care test before issuing fines.

What Software Do You Need?

HMRC does not provide its own software for MTD. You will need to use compatible third-party software to keep digital records and submit your quarterly updates. There are two broad approaches:

• An all-in-one package that handles both record-keeping and submission to HMRC
• A combination of tools, such as a spreadsheet or bookkeeping app alongside bridging software that sends data to HMRC

Both free and paid options are available. HMRC provides a software finder tool on its website to help you identify products that suit your specific circumstances, including whether you are a sole trader, a landlord, or both.

Are There Any Exemptions?

MTD for ITSA is mandatory for most eligible sole traders and landlords, but there are some exemptions. You are automatically exempt if you are:

• Filing under Power of Attorney or a court-appointed authority.
• Acting as the Personal Representative of someone who has died.
• Filing as a Trustee, including for charities or some pension schemes.
• Without a National Insurance number.

You can also apply for an exemption if you are considered digitally excluded, meaning it is not reasonable for you to use software due to age, disability, a health condition, or lack of reliable internet access.

You can apply by calling HMRC on 0300 200 3310 or writing to: Self-Assessment, HMRC, BX9 1AS.

How To Prepare

Whether the changes apply to you from April 2026 or a later date, now is the time to start preparing. Here are the key steps to take:

• Check your qualifying income to confirm when MTD applies to you.
• File your 2024/25 Self-Assessment Tax Return if you have not already done so.
• Research compatible software and choose the right option for your circumstances.
• Set up digital record-keeping as early as possible to build good habits before the deadlines arrive.
• Speak to your accountant if you are unsure how the changes affect you.

Talk To White & Co. Accounting

MTD for ITSA represents one of the biggest changes to personal tax reporting in a generation.

Getting it right from the start will save you time, stress, and the risk of penalties further down the line.

At White & Co. Accounting, we support sole traders, landlords, and small businesses across Kent in managing their tax obligations accurately and on time. If you would like guidance on Making Tax Digital for Income Tax Self-Assessment, or any aspect of your bookkeeping or self-assessment tax returns, please get in touch with our team today.