Making Tax Digital for Income Tax Self Assessment (MTD ITSA) went live on 6 April 2026 for sole traders and landlords with gross qualifying income over £50,000. This is not a minor update to the annual self-assessment process. It requires quarterly digital submissions throughout the year, plus a final annual return. Firms whose clients are in scope and still working on paper-based or year-end-only workflows are already behind.
| Phase | Start date | Threshold | Who is affected |
|---|---|---|---|
| Phase 1 | 6 April 2026 | Over £50,000 | Sole traders and landlords with gross qualifying income above £50,000 |
| Phase 2 | April 2027 | Over £30,000 | Additional sole traders and landlords between £30,000 and £50,000 |
| Phase 3 | April 2028 | Over £20,000 | Further expansion — the majority of self-employed taxpayers |
Qualifying income is gross income from sole trade and property businesses combined, measured before expenses. A landlord earning £30,000 from property who also has a sole trade earning £25,000 has qualifying income of £55,000 and is in scope for Phase 1.
The MTD ITSA regime requires four quarterly updates per tax year, submitted through MTD-compatible software via the HMRC API. The quarters follow the tax year (April to April), though businesses can elect for calendar-year quarter dates if that fits their accounting better.
Quarterly updates are cumulative summaries of income and expenses — not detailed transaction-level submissions. The first quarterly update for the 2026/27 tax year (quarter ending 5 July 2026 for most) is due by 7 August 2026. The annual final declaration, which replaces the old self-assessment return, is due by 31 January 2028 for 2026/27.
The most reliable method is to review 2024/25 self-assessment returns filed by 31 January 2026. Clients with gross trading income or gross property income totalling over £50,000 before expenses are in Phase 1. Gross, not net — a self-employed person with £60,000 turnover and £25,000 expenses has £60,000 qualifying income and is in scope even though their taxable profit is much lower.
Points to watch:
Clients must use HMRC-compatible software to maintain digital records and submit quarterly updates. HMRC does not prescribe specific products but publishes a compatibility list. The main options relevant to UK accounting practices:
Note that the clients maintain the digital records (or the firm does on their behalf through agent software), and submissions go via the software's HMRC API connection. There is no manual form-filling route for clients who are in scope.
MTD for VAT has been mandatory for all VAT-registered businesses since April 2022. Any client who is VAT-registered should already be using MTD-compatible software for VAT returns. The VAT threshold is £90,000 turnover (updated from £85,000 in April 2024). If a client is VAT-registered and using compliant software, the MTD ITSA quarterly update requirement uses the same data infrastructure — it is an extension of what they are already doing, not a new system to set up.
The harder cases are clients who are not VAT-registered (below the £90,000 threshold) but have qualifying income above £50,000 for ITSA purposes — for example, a landlord with £60,000 in rental income who has no trade and therefore no VAT registration. These clients may have no digital accounting software at all and need it set up from scratch.
The shift from annual self-assessment to quarterly MTD submissions changes the workload structure for practices significantly. Work that previously concentrated in the January filing rush is now spread across four quarterly touchpoints per client per year. The implications:
The main accounting packages (Xero, QuickBooks, Sage) handle the MTD submission layer. What they do not handle is the practice-side workflow: which clients have submitted their quarterly data, which are outstanding, automated chasing, and deadline tracking across a client portfolio of potentially hundreds of sole traders.
Practice management tools like Karbon address some of this. For firms with specific workflow requirements — integrating MTD deadline tracking with their existing CRM, client portal, billing system, and staff task management — a bespoke integration layer built around their specific tools and processes can do what off-the-shelf practice management software does not cover out of the box.