Making Tax Digital for Income Tax (MTD for ITSA) has been delayed, revised, and re-announced more times than most people can keep track of. But as of 6 April 2026, the first phase is no longer a future concern for many sole traders and landlords. It is live, and around 780,000 people are now required to comply.

If your qualifying income from self-employment or property was over £50,000 in the 2024 to 2025 tax year, you are already in scope. If you are not sure whether that threshold applies to you, or whether you have set up the right software and reporting process, this post will give you a clear picture of where you stand. We will also cover the next two phases, so you know when the rules will reach you if they have not already.

The honest view from our side: this is a significant change to how self-employed people and landlords report their income to HMRC, and the transition period will catch some people out if they leave it too late.

The first phase of MTD for Income Tax applies to sole traders and landlords whose qualifying income exceeded £50,000 in the 2024 to 2025 tax year. If that describes you, you were required to start using compatible software and submitting quarterly updates from 6 April 2026.

Qualifying income means your gross income from self-employment and property, combined, before any expenses or allowances are deducted. So if you earned £35,000 from freelance work and received £20,000 in rental income, your qualifying income would be £55,000 and you would fall into the first phase.

HMRC estimates that around 780,000 sole traders and landlords meet this threshold. If you are one of them and have not yet signed up, you should take action now. The 2026 to 2027 tax year operates under a soft landing, which means HMRC will not issue penalty points for late quarterly updates during this initial year, and the late-payment grace period has been extended from 15 to 30 days. That gives some breathing room, but it is not a reason to delay indefinitely. Habits and systems take time to bed in, and the penalties that come after the soft landing period are real.

A points-based penalty system applies once the soft landing ends. Each missed quarterly update or Final Declaration earns one point, and four points trigger a £200 fine, with a further £200 for each subsequent late submission after that.

MTD for Income Tax does not stop at the £50,000 threshold. The Government has confirmed two further phases that will bring in a much larger group of people over the next two years.

From 6 April 2027, sole traders and landlords with qualifying income over £30,000 in the 2025 to 2026 tax year will be required to comply. HMRC estimates this will bring in a further 970,000 people. Then from 6 April 2028, the threshold drops again to £20,000, based on 2026 to 2027 qualifying income.

Partnerships will also be brought into MTD for Income Tax at some point, though no confirmed date has been set for that yet.

The practical implication is that if your income sits between £20,000 and £50,000, you have a window to prepare. Our advice to clients in that range is not to wait for the mandatory date to arrive. Adopting compatible software and getting into good bookkeeping habits now means the transition will be far smoother. Scrambling to set up a new reporting process a month before a deadline is exactly the kind of situation that leads to errors and missed submissions.

If you are unsure which phase applies to you, the key question is always your gross qualifying income, not your net profit, for the relevant tax year. It is the top-line figure, before any expenses come off.

The core change under MTD for Income Tax is that you replace the single annual Self Assessment tax return with a system of quarterly updates, followed by a Final Declaration at the end of the tax year.

Each quarter, you submit a summary of your income and expenses to HMRC using compatible software. There are four quarterly update deadlines across the year, and then a Final Declaration (which replaces what was the SA100 annual return) by 31 January following the tax year end.

The software you use must be able to create and store digital records of your self-employment and property income and expenses, send those quarterly updates to HMRC, and support the submission of your tax return. HMRC maintains a list of approved software on its website. Options include full MTD-compatible accounting packages like Xero, QuickBooks, and FreeAgent, as well as bridging software that connects to existing spreadsheet records if you prefer to keep working that way.

You can use more than one software product if you have multiple income sources, but only one product per income source per submission. So if you have self-employment income and rental income, you could use separate tools for each, provided each product meets the requirements for that source.

For most people, the move to quarterly reporting will feel like more admin than the old once-a-year approach. In practice, if your bookkeeping is kept up to date throughout the year, the quarterly submissions become a relatively straightforward process rather than a major exercise.

It is worth being honest about the current state of MTD for Income Tax as a system. As of late 2025, research from TaxWatch found that nearly a fifth of HMRC’s digital interfaces for MTD were not yet fully tested and functional. HMRC’s own helpline has been under considerable pressure, with millions of calls going unanswered in recent years. A significant number of affected taxpayers still have limited awareness of what MTD means for them.

HMRC’s soft landing approach for 2026 to 2027 reflects that reality. It acknowledges that a sharp rollout of a system this size was always going to have friction, and it gives both taxpayers and software providers time to adapt. But the soft landing applies to penalty points for late quarterly updates only. You still need to be registered, using compatible software, and making submissions. Not engaging with the process at all is a different matter.

For taxpayers without an accountant or bookkeeper, the risk is real. Setting up the right software, understanding what counts as a quarterly update, and making sure your Final Declaration is accurate all take more time and knowledge than the old paper-based or basic online return process did. If you have historically filed your own Self Assessment and found it manageable, MTD adds layers that may make professional support worthwhile.

We work with sole traders and landlords across the UK to manage exactly this kind of transition, and the clients who have planned ahead have found it far less stressful than those who are now catching up.