MTD for ITSA from 6 April 2026: Key Requirements Explained
30/11/2024 - 10 minutes readMTD for ITSA from 6 April 2026 – Making Tax Digital for Income Tax will require many landlords and self-employed individuals to keep digital records of income and expenditure relating to their businesses and rental properties.
MTD for ITSA from 6 April 2026 will not change the due dates for paying income tax or filing the final ‘digital tax return’.
Who does MTD for ITSA from 6 April 2026?
MTD ITSA will ultimately encompass self-employed individuals and landlords with gross ‘qualifying income’ of more than £30,000. Qualifying income means sole trade and property income and is measured before deduction of expenses – see When does MTD ITSA apply from for more details.
Exemptions – MTD for ITSA from 6 April 2026
Individuals who don’t have a National Insurance number on 31 January will be exempt from MTD ITSA for the following tax year. This exemption applies automatically and does not need to be claimed.
Exemption can also be claimed by individuals who are digitally excluded, but the method of applying for this exemption has not been confirmed at the time of writing.
Outside the scope of MTD for ITSA from 6 April 2026, for now
For the time being, sole-traders and landlords with turnover of £30,000 or less will not need to comply with the requirements of MTD ITSA, and will remain in the current Self-Assessment regime. At the Autumn Budget 2024 it was announced that those with turnover of between £20,000 and £30,000 will also be brought within MTD ITSA by the end of this Parliament, but the exact date for this is not yet known.
Similarly, partnerships (including LLPs) are not in scope of MTD ITSA for now, but are intended to be brought in at a later date. The individual members of a partnership are also not currently within the scope of MTD ITSA in respect of their partnership income, despite being treated as self-employed for most tax purposes. However, any self-employment or property income outside the partnership could bring them into MTD for those non-partnership sources only, where this exceeds the relevant thresholds (see below).
MTD ITSA does not apply to companies. It is not yet known when MTD might be extended to Corporation Tax.
When does MTD for ITSA from 6 April 2026 become mandatory?
Phase 1: From April 2026 – those with gross qualifying income of more than £50,000.
Phase 2: From April 2027 – those with gross qualifying income of more than £30,000.
Qualifying income is the gross income from sole trade and property businesses (ie sole trade and property income combined and measured before expenses). For jointly held sources of income, only the relevant share is counted – eg if a husband and wife own a rental property equally, each spouse’s qualifying income would be their share of the gross rent.
When is gross income measured?
The thresholds for the two phases of MTD ITSA mandation will be assessed against the gross qualifying income reported on the most recent tax return filed prior to the mandation date (assuming all returns are filed on time).
For instance, 2024/25 tax returns will be due for submission by 31 January 2026. If that return reports gross qualifying income of more than £50,000, that individual will have to join MTD for ITSA from 6 April 2026.
If the sole trade or property income declared by an individual relates to a new source of income which started in the year, the figure reported will need to be adjusted proportionately in order to compare 12 months’ worth of income against the MTD ITSA mandation threshold.
Reliefs and allowances
Sole trade or property income which is not reported on a tax return because it is covered by a relevant relief or allowance (such as Rent a Room relief, or the property or trading allowances) does not count towards the MTD ITSA thresholds.
However, if the taxpayer is required to join MTD ITSA anyway, they will need to comply with MTD requirements for all sources of trading and property income (including those covered by Rent a Room relief or the trading / property allowance).
Will HMRC register people for MTD for ITSA from 6 April 2026?
HMRC will not register taxpayers within scope of MTD ITSA automatically. Taxpayers whose income meets the relevant threshold will need to sign up to use MTD ITSA in much the same way as taxpayers register for Self-Assessment now.
Agents will be able to sign their clients up to MTD ITSA, but there won’t be a bulk sign-up service, so this will be a time-consuming exercise for larger firms. The sign up facility is not yet available, but is expected to open well in advance of April 2026 to allow plenty of time for registrations.
What will MTD for ITSA from 6 April 2026 involve?
There are 3 main components to MTD for ITSA from 6 April 2026:
- Digital record keeping
- Quarterly updates
- A year-end summary process
Digital record keeping under MTD for ITSA from 6 April 2026
Under MTD ITSA, individuals will have to keep digital records of the amount, category and date of income and expenses relating to their sole trade and/or property businesses. These records can be kept either in purpose-built software, or on spreadsheets.
Quarterly updates under MTD for ITSA from 6 April 2026
Taxpayers within MTD ITSA will need to submit a summary to HMRC of their income and expenses each quarter, fed from their digital records. These are not ‘mini tax returns’ as accounting and tax adjustments are optional. Instead, they will just represent the total of each category of income and expense that quarter.
A separate quarterly update will be needed for each trade or property business – so a sole trader who also rents out a property would have eight quarterly submissions to make each year.
By default, the quarters will follow the tax year, not the accounting period of the business. Updates must be filed by the 7th of the month following the quarter-end. So, the first quarter will run from 6 April to 5 July, and the quarterly update will need to be submitted to HMRC by 7 August.
To better align with accounting dates, taxpayers can choose to make a ‘calendar quarters election’. This would result in the first quarter running from 1 April to 30 June, the second from 1 July to 30 September and so on. The due dates for filing quarterly updates aren’t affected, so the first quarterly update is due by 7 August, the second by 7 November and so on.
Quarterly updates will be cumulative, so if an error is discovered in a previous submission, it can be corrected the following quarter
Year-end declaration
After the fourth and final quarterly update has been filed, the taxpayer will need to submit a ‘digital tax return’. This will have similarities with the current Self-Assessment return, but will pre-populate with the income and expenses from the quarterly updates already filed. Those entries will then need to be adjusted for accounting and tax purposes (eg disallowing elements of private use or capital expenditure).
At the same time, other (non-MTD) sources of income, such as bank interest and PAYE income, will need to be either reported or the entries pre-populated by HMRC will need to be checked, along with any capital gains being declared and relevant reliefs claimed.
Depending on how the taxpayer (or agent) keeps the digital records, this year-end process may be done in software, or via a new HMRC online service.
As with ‘ordinary’ Self-Assessment, the filing deadline for the year-end return will be 31 January following the end of the tax year.
How can MCL Accountants help with your queries on MTD for ITSA from 6 April 2026?
Contact MCL Accountants on 01702 593 029 if you would like us to answer your queries on MTD for ITSA from 6 April 2026 or if you need any assistance with the preparation and submission of your business accounts or self-assessment tax returns to HMRC.
- ABOUT
- REQUEST A QUOTE
Ishan provides financial management, taxation and transactional advice to business entities of all sizes. His expert areas include statutory compliance, business taxation, personal tax & transactional processing and systems. Industry sectors include professional services, retail, hospitality and entertaining & media and advertising services.
0 Comments