Everything sole traders and landlords need to know about the biggest change to UK income tax reporting in decades, and how MCas will help you get ready.
Making Tax Digital for Income Tax Self Assessment is a UK government initiative that changes how sole traders and landlords report their income to HMRC.
Instead of submitting a single annual Self Assessment return, affected individuals will be required to keep digital records and submit quarterly updates to HMRC throughout the tax year, using HMRC-compatible software.
At the end of the year, a final declaration replaces the traditional tax return. The process is designed to make tax records more accurate, reduce errors, and bring reporting closer to real time.
MTD for Income Tax is not optional, once your qualifying income exceeds the relevant threshold, you must comply. The consequences of non-compliance include penalties from HMRC.
MTD for Income Tax applies to sole traders and landlords based on their qualifying income — which means the combined gross income from self-employment and property.
Sole traders and landlords with qualifying income over £50,000 in the 2024/25 tax year must comply from this date.
Those with qualifying income over £30,000 in the 2025/26 tax year must join. This extends MTD to a significantly larger group.
The threshold reduces further to £20,000 qualifying income in the 2026/27 tax year, bringing the majority of self-employed individuals into scope.
Qualifying income means the combined gross income from self-employment and property before expenses. If you are both self-employed and a landlord, both income streams count together toward the threshold — even if neither individually exceeds it.
Partnerships are expected to join MTD ITSA in future, but no start date has yet been announced. We will keep our clients updated as the rules develop.
All income and expenditure must be recorded digitally using HMRC-compatible software. Spreadsheets alone will not meet the requirement unless linked via a bridging tool.
A summary of your income and expenses must be submitted to HMRC four times per year, within one month of each quarter-end. Missing deadlines may incur penalties.
After the tax year ends, a final declaration confirms your total income, claims adjustments and reliefs, and settles your tax position. This replaces the annual Self Assessment tax return.
You must use HMRC-recognised software — such as Xero, QuickBooks, FreeAgent, or Sage — to maintain records and submit updates. MCas will help you select and configure the right option.
Limited exemptions may apply for those who genuinely cannot engage digitally (digital exclusion) or in certain circumstances based on religious grounds, subject to HMRC approval. Each case is assessed individually.
HMRC advises businesses to prepare well in advance. Leaving it until the deadline creates unnecessary risk. We recommend beginning your MTD readiness assessment now, regardless of which wave you fall into.
The key dates you need to know — including existing self-assessment deadlines running alongside the MTD rollout.
Deadline to submit the traditional Self Assessment tax return for the 2024/25 tax year. This is the last year this group must file in the old format.
Mandatory for sole traders and landlords with qualifying income over £50,000 in the 2024/25 tax year. Digital records and quarterly submissions begin from this date.
The first MTD quarterly update for Wave 1 taxpayers is due covering April to June 2026. Missing this deadline may result in a penalty.
Those not yet in MTD must submit their 2025/26 tax return by this date. Those in Wave 1 will complete their first end-of-year declaration through MTD software instead.
Mandatory for those with qualifying income over £30,000 in the 2025/26 tax year. This significantly expands the MTD population.
Mandatory for those with qualifying income over £20,000 in the 2026/27 tax year. At this stage, the majority of self-employed individuals and landlords will be within scope.
The first full end-of-year declaration submitted through MTD software for the 2026/27 tax year, for Wave 1 taxpayers who started in April 2026.
MTD ITSA introduces a new way of working and it requires preparation. MCas will guide you through every step, from initial assessment to live quarterly submissions.
We review your income to determine whether and when you fall within the thresholds, and what your first compliance date will be.
We help you choose from HMRC-compatible platforms like Xero, QuickBooks, FreeAgent, or Sage, based on your needs and budget.
We configure your software, migrate existing records, and establish a clean digital bookkeeping workflow that meets HMRC's requirements.
We prepare and submit your quarterly updates to HMRC on your behalf, keeping you compliant and on deadline every quarter.
We prepare and submit your annual end-of-year declaration, claiming all applicable reliefs and finalising your tax position for the year.
The earlier you prepare, the smoother the transition. Book a free MTD readiness consultation, we'll tell you exactly where you stand, what you need to do, and how MCas can manage it all for you.