MTD for ITSA Explained (UK 2025/26): Do You Need to Join in 2026 and What Changes?

If you’re a sole trader or landlord, the key questions are simple: Do I need to sign up? When? What software? What happens if I miss a deadline? This guide answers all of that in plain English so you can get compliant without hassle.

Quick answer: If your qualifying income (gross self-employment and/or property) was £50,000+ in 2024/25, you’re in from 6 April 2026. If it was £30,000–£49,999 in 2025/26, you’re in from 6 April 2027. The government has also set out plans to legislate £20,000+ (assessed 2026/27) from 6 April 2028. GOV.UK

Who must join MTD for ITSA and when?

  • £50,000+ (assessed in 2024/25) → start 6 April 2026.
  • £30,000–£49,999 (assessed in 2025/26) → start 6 April 2027.
  • Planned: £20,000+ (assessed in 2026/27) → 6 April 2028 (subject to legislation). GOV.UK

HMRC will consider your total qualifying income from your latest return and write to you, but it’s still your responsibility to be ready and signed up on time. Making tax digital for Income Tax

Helpful next step:

DIY bookkeeping checklist UK (2025 26) – set up categories, receipt capture and bank feeds now so MTD is painless later.

What actually changes under MTD ITSA?

You must keep digital records and submit quarterly updates for each income source (every trade is separate; UK property and foreign property are separate), then complete a Final Declaration in software after the tax year. HMRC’s developer guidance and journey pages set out the end-of-year Final Declaration process; HMRC has removed the separate End-of-Period Statement (EOPS) step in the developer documentation. GOV.UK

Callout: What counts as a “source”?
Each trade is its own source. UK property and foreign property are separate sources with their own records and quarterly updates. Joint-lets are recorded per owner (you keep your share). GOV.UK

Also note: in your first MTD year you’ll still file a normal Self Assessment for the previous year (because you didn’t send quarterly updates for that earlier year). After that, you’ll finalise via software each year. Making tax digital for Income Tax

Do landlords need MTD ITSA?

Yes, landlords follow the same thresholds. Keep digital property records (UK vs foreign kept separately), send quarterly updates for each property business, and complete the Final Declaration in software at year end. Joint owners each submit their own updates. GOV.UK

Related read:
sole trader to limited company UK, when incorporation or an SPV changes (and doesn’t change) your obligations and taxes.

Exemptions and deferrals (who does not need to use MTD ITSA?)

You can apply for a digital exclusion exemption where it’s not reasonable to use software (for example due to age, disability or remoteness). HMRC’s new guidance explains the process and recommends applying well before your start date; HMRC aims to process applications in around 28 days (but prepare in case it’s refused). GOV.UK

HMRC also sets out other exemption/deferral categories in its eligibility pages and campaign guidance; partnerships are not mandated yet. GOV.UK

Callout: Think you’re digitally excluded?
Use HMRC’s guidance to apply for an exemption; prepare a fallback plan (software) while you wait for a decision. GOV.UK

Quarterly updates & deadlines: what to expect

You’ll submit a summary of income and expenses every 3 months for each income source. HMRC’s timeline examples show the typical cadence for the 2027 cohort: 7 Aug, 7 Nov, 7 Feb, 7 May; your software will surface the exact dates for your cohort. Making tax digital for Income Tax

Tip: Calendar the four deadlines for each source as soon as you sign up.

What software do you need?

You must use HMRC-compatible software. HMRC provides a searchable list (updated 9 Oct 2025) and explains you can either use one product or multiple products that work together. You can also use spreadsheets with MTD-compatible bridging software as long as digital links are preserved no manual re-typing figures between systems. GOV.UK

HMRC and the campaign site also highlight free options for simpler affairs. HMRC Developer Hub

Penalties under MTD ITSA (late submission & late payment)

MTD ITSA adopts the points-based late submission model (already in use for VAT): you accrue points for missed deadlines and only receive a financial penalty once you hit the threshold. HMRC’s penalty reform pages explain how this works. GOV.UK

There’s also a separate late payment penalty regime. From 1 April 2025, the government increased the percentage rates under Schedule 26 FA 2021 (e.g., charges at 15, 30 days and a higher ongoing rate from day 31). GOV.UK

Related read:
Vat penalties and compliance UK, see how the points system works in practice and habits to avoid fines.

Step-by-step: how to get ready (service SMEs & landlords)

  1. Check your cohort (2026 vs 2027; planned 2028 for £20k+). Use HMRC’s eligibility checker and plan your sign-up date. GOV.UK
  2. Pick compatible software (or spreadsheets + bridging) and switch on bank feeds; map categories to Self Assessment boxes so your quarterly updates flow cleanly. GOV.UK
  3. Split your records by source: each trade = separate; UK vs foreign property are separate property businesses. GOV.UK
  4. Calendar quarterly dates for each source (your software will show them; HMRC timeline examples include 7 Aug/7 Nov/7 Feb/7 May). Making tax digital for Income Tax
  5. Finalise year-end in software with the Final Declaration (EOPS is not a separate step in HMRC’s developer journey). HMRC Developer Hub

Helpful how-to:
DIY bookkeeping checklist UK 2025-26, categories, receipt capture and bank rules that mirror SA.

Quick planner (at-a-glance timelines)

£50k+ cohort (assessed 2024/25)

£30k–£49,999 cohort (assessed 2025/26)

Heads-up: The government has set out plans to legislate a £20k+ cohort from 6 Apr 2028. Track updates as they pass through legislation. GOV.UK

FAQ

Does MTD ITSA replace Self Assessment?

If you’re mandated into MTD, you’ll finalise your position via a Final Declaration in software instead of submitting a traditional online SA return for that year. (In your first MTD year, you still file SA for the previous year.) Making tax digital for Income Tax

Are spreadsheets allowed?

Yes—with bridging software that preserves digital links to HMRC. HMRC explains bridging and using multiple products that work together. GOV.UK

I have two trades and a rental—how many updates?

Separate digital records and quarterly updates for each source (each trade; UK property; foreign property). You then make one Final Declaration at year end. GOV.UK

Do partnerships need to join in 2026/27?

No timetable yet for partnerships; HMRC confirms this on its campaign site Q&A. Making tax digital for Income Tax

What if I’m borderline on the threshold?

HMRC checks qualifying income from the prior year to decide your start date and will write to you, but you must self-check and prepare to sign up in time. GOV.UK

What Heights will do for you

  • Confirm your cohort and create a practical sign-up plan.
  • Select and configure MTD-compatible software (or bridging), align categories to SA, automate bank feeds, and set quarterly workflows.
  • Review your quarterly data and Final Declaration, so you avoid points-based penalties and late-payment charges. GOV.UK

Book a clarity call and we’ll map your exact steps.