MTD ITSA Is Coming in April 2026: Are You Ready?

Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is the biggest change to UK tax compliance in a generation. After years of delays and consultations, it is finally happening: from April 2026, qualifying sole traders and landlords will be required to keep digital records and submit quarterly updates to HMRC through MTD-compatible software.

What Is MTD ITSA?

Making Tax Digital for Income Tax Self Assessment extends the principles already established by MTD for VAT to the world of income tax. Instead of submitting a single annual Self Assessment tax return, affected taxpayers will need to:

• Keep digital records of all business income and expenses using MTD-compatible software
• Submit quarterly updates to HMRC summarising their income and expenses for each quarter
• Submit an End of Period Statement (EOPS) confirming the figures for the full tax year
• Submit a Final Declaration replacing the current Self Assessment tax return

The quarterly updates are due by the 7th of the month following the end of each quarter. For the standard tax year (6 April to 5 April), this means deadlines of 7 August, 7 November, 7 February, and 7 May.

Who Is Affected?

MTD ITSA will be introduced in phases based on income thresholds:

Phase 1: April 2026

Sole traders and landlords with gross income from self-employment and/or property exceeding £50,000 per year will be required to comply from 6 April 2026. This is based on the combined income from all self-employment and property sources, not profit.

Phase 2: April 2027

The threshold drops to £30,000, bringing many more sole traders and landlords into scope. If your combined self-employment and property income exceeds £30,000, you will need to comply from April 2027.

Future Phases

HMRC has indicated that the threshold will eventually be lowered further, potentially to £20,000 or below, but no dates have been confirmed for these additional phases. Partnerships are also expected to be brought into MTD ITSA, but again the timeline for this is not yet confirmed.

What Changes in Practice?

For those affected, the day-to-day impact is significant:

Digital Record-Keeping

You will no longer be able to keep records on paper or in spreadsheets (unless the spreadsheet is linked to MTD-compatible software through an API). All income and expenses must be recorded digitally in software that can communicate with HMRC's systems.

Quarterly Submissions

Four times a year, your software will submit a summary of your income and expenses to HMRC. These are not tax returns — they are progress updates. HMRC will use them to provide an estimated tax position, helping you understand your likely liability throughout the year rather than getting a surprise at year end.

End of Period Statement

After the end of the tax year, you will submit an End of Period Statement (EOPS) for each source of income. This finalises the figures for that source and allows you to make any adjustments, such as capital allowances or stock adjustments, that were not included in the quarterly updates.

Final Declaration

The Final Declaration replaces the current Self Assessment tax return. It brings together all sources of income (including employment income, dividends, and other non-MTD income), allows you to claim reliefs and deductions, and calculates your final tax liability for the year.

How to Prepare Now

Even if the April 2026 deadline seems some way off, there are steps you should be taking now to ensure a smooth transition:

1. Choose MTD-Compatible Software

HMRC maintains a list of software providers that are recognised for MTD ITSA. TaxStats is fully MTD ITSA compatible and handles quarterly submissions, EOPS, and Final Declarations through a single platform. If you are already using TaxStats for your bookkeeping or Self Assessment, you are essentially ready.

2. Start Keeping Digital Records Now

Do not wait until April 2026 to switch from paper or spreadsheets to digital record-keeping. Start now so that you are comfortable with the software and have established good habits before the mandatory start date. This also means you will have comparative data from the previous year.

3. Understand Your Income Threshold

Calculate your combined gross income from self-employment and property to determine which phase applies to you. Remember, this is gross income (turnover), not profit. If you have multiple self-employment or property businesses, add all of them together.

4. Talk to Your Accountant

If you use an accountant, discuss MTD ITSA with them now. Understand what their role will be under the new system, whether they will be submitting quarterly updates on your behalf or whether you will be expected to do this yourself. Clarify any changes to fees that might result from the additional quarterly work.

5. Set Up Bank Feeds

Connect your business bank account to your accounting software via Open Banking. This ensures transactions flow in automatically, reducing manual data entry and making quarterly submissions more straightforward. TaxStats supports Open Banking through TrueLayer with real-time transaction sync.

How TaxStats Is MTD ITSA Ready

TaxStats has been designed with MTD ITSA in mind from the start. Our platform provides:

• Automatic quarterly calculations — your income and expenses are summarised automatically at the end of each quarter
• One-click quarterly submission — submit your quarterly update to HMRC directly from the platform
• EOPS generation — End of Period Statements are prepared from your existing data with adjustments
• Final Declaration — complete your Final Declaration within the same platform, pulling in all income sources
• Real-time tax estimate — see your estimated tax liability throughout the year, updated with each transaction
• HMRC deadline tracking — never miss a quarterly deadline with automatic reminders

What About Penalties?

HMRC is introducing a new points-based penalty system for late submissions under MTD ITSA. Each late quarterly submission adds a penalty point. Once you reach the threshold (currently four points for quarterly obligations), a £200 penalty is charged for that late submission and every subsequent one until the points are reset.

Late payment penalties also apply, with interest charged from the due date. The first 15 days after the due date attract a lower penalty rate, with a higher rate applying after 30 days.

The message is clear: quarterly deadlines are real deadlines, and missing them will cost you.

Conclusion

MTD ITSA is not a future possibility — it is happening in April 2026 for those with income over £50,000, and in April 2027 for those over £30,000. The time to prepare is now, not in March 2026.

If you are a sole trader or landlord, start using MTD-compatible software today. Set up your digital records, connect your bank feeds, and get comfortable with the quarterly rhythm. And if you need help, TaxStats is here — our platform handles every aspect of MTD ITSA compliance, from digital record-keeping to quarterly submissions to your Final Declaration.