Part of our complete guide to VAT & MTD.
What MTD for Income Tax actually changes
Making Tax Digital for Income Tax Self Assessment (MTD ITSA) replaces the single annual self assessment return, for those it applies to, with a different rhythm entirely: digital record-keeping throughout the year, four quarterly updates sent to HMRC through approved software, and a final year-end declaration. It doesn't change how much tax you owe, it changes how and how often you report it.
Who's in scope, and when
MTD ITSA is rolling out in phases based on qualifying income, your gross income from self-employment and property combined, before expenses:
- Already live: sole traders and landlords with qualifying income over £50,000
- From April 2027: qualifying income over £30,000
- From April 2028: qualifying income over £20,000
If your income sits below £20,000, you're not currently scheduled to be brought in, though the threshold has been lowered before and may be again.
Key point: It's your total gross income across all self-employment and property sources that counts toward the threshold, not your profit after expenses, and not any single source in isolation. Add them together before assuming you're under the limit.
Who it doesn't apply to
- Limited companies are not in scope for this phase, they have separate digital filing obligations through Corporation Tax
- Partnerships are not yet included, though this is expected to follow in a later phase
- Employees whose only income is PAYE salary aren't affected at all
What you need to do before your phase arrives
- Work out your qualifying income from your last tax return, to see which phase, if any, applies to you
- Move to digital record-keeping before your start date, not on it, spreadsheets alone generally don't qualify, you need MTD-compatible software or a bridging tool
- Get comfortable with quarterly submissions, which means your bookkeeping needs to be current throughout the year, not caught up once in January
Already over £50,000, or approaching it? Book a free consultation and we'll get your bookkeeping onto compliant software well before your phase starts, and handle the quarterly submissions as part of our bookkeeping service.
Frequently asked questions
What is MTD for Income Tax?
Making Tax Digital for Income Tax Self Assessment (MTD ITSA) requires qualifying sole traders and landlords to keep digital records and submit quarterly updates to HMRC through approved software, rather than filing one annual return.
Who is affected right now?
Sole traders and landlords with qualifying income over £50,000 are already in scope. The threshold is being lowered in phases to bring in more businesses over time.
Does MTD ITSA apply to limited companies?
No, this phase of Making Tax Digital applies to individuals filing self assessment as sole traders or landlords, not to companies, which have their own separate digital filing requirements.
What software do I need?
MTD-compatible bookkeeping software that can submit quarterly updates directly to HMRC. We set our bookkeeping clients up on approved software as part of the service, so this is handled rather than something you manage yourself.