Making Tax Digital for Income Tax Self Assessment, almost always shortened to MTD ITSA, finally came into force on 6 April 2026 for sole traders and landlords with more than £50,000 of qualifying income. If you fall into that bracket and you have not signed up, you are already behind on your first quarterly update. The good news is that HMRC has confirmed there are no penalties for missing quarterly-update deadlines during the 2026/27 tax year for those mandated in from 6 April 2026. Late tax return and late payment penalties still apply, so it is not a free pass. The bad news is that ignoring it is no longer an option.
This guide explains who is affected, what you actually have to do that you did not have to do under Self Assessment, and the practical steps to get yourself compliant this week.
Who is affected from April 2026
You are in the first wave of MTD ITSA if you are a sole trader or landlord whose total qualifying income for the 2024/25 tax year was more than £50,000. Qualifying income means your gross self-employment turnover plus your gross rental income before any expenses. It is not your profit, it is the total received before deductions. So a freelancer with £55,000 of revenue and £30,000 of expenses (real profit £25,000) is in scope, even though their actual taxable income is well below the threshold.
HMRC identified the affected population from 2024/25 Self Assessment returns and has been writing to those it believes are in scope. If you have not had a letter, that does not mean you are off the hook. The legal obligation is on you to know whether you are in scope, not on HMRC to tell you.
Who is affected later
The threshold drops over the next two tax years. From 6 April 2027, anyone with qualifying income above £30,000 is in scope. From 6 April 2028, the threshold falls again to £20,000. Below £20,000 there is no current obligation to use MTD ITSA, and you continue with normal Self Assessment.
If you are not in the first wave but you will be in the second or third, the right move is not to ignore MTD until your year. Choose your software now, get used to digital record-keeping for the next tax year, and avoid the rush of converting in the months before your deadline.
What you have to do differently
The main change is that you have to keep digital records of your income and expenses in MTD-compatible software. Spreadsheets are still allowed, but only if you combine them with bridging software that can submit the data to HMRC in the right format. A pile of receipts in a shoebox is no longer acceptable record-keeping for anyone in scope.
On top of digital records, you have to submit a quarterly update to HMRC every three months, calculated from the start of the tax year. The first quarter ends on 5 July, with the update due by 7 August. The second ends 5 October, due 7 November. The third ends 5 January, due 7 February. The fourth ends 5 April, due 7 May. The updates are not full accounts, just totals of income and expenses for the quarter.
Self Assessment Helper
Confused by self assessment? Tell us about your income and circumstances and get a clear guide to what you need to declare, what you can claim, and the key deadlines.
Try our Self Assessment Helper free, here on this site →At the end of the tax year, you submit your tax return through MTD-compatible software. This pulls together the quarterly updates, any year-end adjustments, and other income such as employment, dividends or savings interest, and arrives at your final tax position. For the in-scope year, this replaces the old Self Assessment filing process, although you still need to file the previous year's Self Assessment return in the usual way before MTD starts. The deadline is 31 January following the end of the tax year, the same as the old Self Assessment.
What you do not need to do
You do not need to submit your full accounts more often. The quarterly updates are summary figures, not full bookkeeping. You also do not need to pay tax more often. Payments on account are still due on 31 January and 31 July, exactly as they were under Self Assessment, and the balancing payment is still due on 31 January.
Your 2025/26 Self Assessment is still due by 31 January 2027 as normal. That tax year ended on 5 April 2026, before MTD ITSA came into force, so it falls under the old Self Assessment regime. The first tax year that goes through MTD ITSA for first-wave taxpayers is 2026/27, and the final declaration for that year is due by 31 January 2028.
Software you will need
HMRC publishes a list of MTD ITSA-compatible software providers on gov.uk. There are free options for very simple cases, but most sole traders and landlords will find paid software easier to use. Popular paid options include FreeAgent, QuickBooks, Xero and Sage. The cost is typically £10 to £30 a month depending on the package.
If you are already using accounting software for your business, check whether your current provider is on the HMRC list. If they are, the upgrade is usually a matter of switching on a setting and authorising HMRC. If they are not, you may need to migrate.
Penalties for late submission
HMRC has introduced a points-based penalty system for MTD ITSA, similar to driving licence points. For taxpayers who are mandated into MTD ITSA from 6 April 2026, however, HMRC says there are no penalties for missing quarterly update deadlines during the 2026/27 tax year. Penalties can still apply for late tax returns and late payment.
From later tax years, missed quarterly updates will begin to attract penalty points. For quarterly submitters, the threshold is four points, at which stage a fixed £200 penalty applies, followed by a further £200 for each additional missed deadline until compliance is restored.
What to do this week if you are affected
First, sign up for MTD ITSA via the gov.uk website. The signup process asks you to confirm your details and authorise HMRC to receive submissions from your chosen software. Second, choose your software from the HMRC-approved list and set it up. Third, if you use an accountant, authorise them to act for you for MTD purposes (this is a separate authorisation from the standard agent authorisation for Self Assessment). Fourth, set up your digital record-keeping process so that every transaction from 6 April 2026 onwards is captured.
If you missed the first quarterly deadline (7 August 2026), file the missed update as soon as you can. HMRC has confirmed there are no quarterly-update penalties for taxpayers mandated into MTD ITSA from 6 April 2026 during the 2026/27 tax year, so a single late submission in isolation will not produce a fine. From later tax years, however, the points-based system will start to bite, so the longer-term answer is to get back into a clean filing pattern as quickly as possible.
Next Step
If your qualifying income for 2024/25 was over £50,000, sign up for MTD ITSA on gov.uk today and pick a compatible software package this week. If you are unsure whether your income meets the threshold, or whether your particular setup counts as qualifying income, use the Self Assessment Helper for a personalised explanation of your filing obligations.
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