Making Tax Digital for Income Tax: in five minutes
If you're a sole trader or landlord, you may have already received a letter from HMRC about Making Tax Digital for Income Tax Self Assessment (or MTD for ITSA, for short). It's the biggest change to how self-employed people and landlords report their income in decades, and the first phase is already underway. Here's what it means in plain English.
What's actually changing
Instead of filing one Self Assessment return a year, MTD for ITSA requires you to:
Keep digital records of your income and expenses throughout the year
Send HMRC a quarterly digital update summarising your income and expenses
Submit a final declaration at the end of the tax year, confirming your figures and any adjustments
In short, tax reporting moves from an annual event to an ongoing, four-times-a-year habit; all completed through MTD-compatible software rather than paper records or spreadsheets.
Who does it apply to, and when?
The rollout is being phased in by income level:
From April 2026: mandatory for sole traders and landlords with gross income over £50,000
From April 2027: extended to those with gross income between £30,000 and £50,000
From April 2028 (Planned): Expected to expand to those with an income over £20,000.
"Gross income" means your total income before expenses, so it's worth checking this carefully. Most commonly it can catch people out who assume it refers to profit, it doesn’t.
Why HMRC is sending letters now
If your income is likely to put you in the first group, HMRC has been writing to warn people ahead of time. It's not a penalty notice, it's a heads-up so you have time to prepare. But it's easy to let a letter like this sit in a drawer, and the businesses that leave it too late are the ones who end up scrambling.
What you should do now
Check whether you're affected — look at your gross income from self-employment and/or property for the relevant tax year.
Make sure your record-keeping is digital — if you're still using spreadsheets or paper, now's the time to move to compatible software.
Get comfortable with quarterly reporting — this is a shift in habit as much as process, and it's easier to adjust to gradually than all at once.
Ask for help if you're unsure — the phased thresholds, exemptions, and software requirements can get confusing quickly.
The upside
It's not all extra admin for nothing. Reporting more regularly means fewer surprises at year-end, better visibility of your tax position throughout the year, and less risk of errors piling up unnoticed. Businesses that get ahead of it now tend to find the transition far less stressful than those who wait.
If you've received a letter from HMRC, or you're simply not sure whether MTD applies to you yet, get in touch — I can check where you stand and make sure you're set up well before any deadline creeps up on you.
