Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is HMRC's ambitious programme to move the UK's tax reporting system to digital-first quarterly updates. If you're self-employed or a landlord, here's exactly where you stand in 2026 and what's coming in 2027.
Current Mandatory Threshold (2026/27): £50,000
From 6 April 2026, sole traders and landlords with combined qualifying income exceeding £50,000 per year must comply with MTD ITSA. This means:
- Keeping digital records of all income and expenses in HMRC-approved software
- Submitting quarterly updates to HMRC (4 times per year)
- Submitting a final declaration (replacing the old Self Assessment return) after the tax year ends
What's Coming in 2027: The £30,000 Threshold
From 6 April 2027, the threshold drops to £30,000. This will sweep in a significant additional group of self-employed workers — freelancers, tradespeople, consultants, and landlords with more modest incomes. If your qualifying income is currently £35,000–£50,000, April 2027 is your deadline.
The Penalty System
HMRC uses a points-based penalty system:
- Each missed quarterly update: 1 penalty point
- Reaching the threshold (4 points): £200 fine
- Each subsequent missed update after fine: another £200
- Missing the final declaration: £100 immediately, rising to £300 or 5% of tax owed at 6 months
What Software Do You Need?
HMRC maintains an approved software list. Options include QuickBooks, Xero, FreeAgent, and several free/low-cost tools. "Bridging software" allows you to continue using spreadsheets but connects to HMRC via an intermediary — a lower-cost option if you don't want to change your workflow entirely.
Frequently Asked Questions
Does MTD apply to all income or just self-employment?
MTD ITSA covers self-employment income and property (rental) income. Your PAYE employment income is not included in the MTD system — that continues through the existing PAYE infrastructure. The qualifying income test is purely about self-employment + property combined.
I'm below £30,000. Should I prepare now?
The government has proposed extending MTD ITSA to incomes of £20,000 from April 2028 (subject to legislation). If you earn £20,000–£30,000 from self-employment or property, you have approximately two years to prepare. Starting with compliant software now builds good habits and avoids a last-minute scramble. Use our MTD Readiness Checker.