What is MTD for Income Tax?
Making Tax Digital for Income Tax Self Assessment (MTD ITSA) replaces the traditional annual Self Assessment tax return with quarterly digital updates submitted through HMRC-approved software. The regime applies to sole traders and landlords with qualifying income above the threshold.
Who is in scope from April 2026?
From April 2026, MTD ITSA applies to self-employed individuals and property landlords with total gross income exceeding £50,000 per year. Those earning between £30,000 and £50,000 will be mandated from April 2027. HMRC has indicated that a further cohort (£20,000+) will follow, though the exact date is subject to review.
What you need to do
- Choose MTD-compatible software: Xero, QuickBooks, and FreeAgent are all approved. Beacon & Ledger recommends Xero as a Xero Partner.
- Register for MTD ITSA via HMRC's agent or self-service portal: registration must happen before your first quarterly period begins.
- Keep digital records: every income and expense transaction must be recorded digitally in the approved software, not on spreadsheets.
- Submit quarterly updates: four updates per year (April to June, July to September, October to December, January to March) plus a year-end finalisation statement.
Penalties for non-compliance
HMRC's new points-based penalty regime means that missed quarterly updates accumulate penalty points. At four points, a £200 fixed penalty applies. Late payment penalties apply separately.
How Beacon & Ledger can help
We manage MTD ITSA compliance for self-employed clients end-to-end: software setup, quarterly submissions, and year-end finalisation. Book a free call to check whether you're in scope and get a clear plan.