HMRC's landmark shift to digital tax — mandatory for sole traders and landlords from April 2026. Everything you need to know about thresholds, quarterly reporting, HMRC-recognised software, and staying compliant.
All figures from HMRC's published guidance on GOV.UK. MTD for VAT is already mandatory for all VAT-registered businesses since April 2022.
Per HMRC's published guidance, MTD for Income Tax (MTD ITSA) applies based on gross qualifying income — not profit. Your qualifying income is the total of your self-employment and/or property income before expenses.
Anyone self-employed — consultants, tradespeople, gig workers, Etsy sellers — whose gross trade income exceeds the threshold. HMRC counts your gross turnover, not take-home pay.
Mandatory from April 2026 (£50k+)Individuals with UK property income above the threshold must join. Rental income is gross rent received, before mortgage interest, repairs or agent fees. FHL and SA105 property both count.
Mandatory from April 2026 (£50k+)Self-employment and property income are added together to determine your threshold. A trader with £35k turnover plus £18k rent = £53k combined — above the £50k threshold.
Combined income assessedMTD for Corporation Tax has no confirmed mandatory date as at May 2026. Limited companies are not yet within MTD ITSA scope. Directors with personal self-employment income may be caught personally.
No mandatory date yetGeneral, limited and LLP partnerships have been deferred from MTD for Income Tax. No mandation date has been set for partnerships as an entity. Individual partners may be caught personally.
Deferred — no date setIf your only income is from employment taxed through PAYE with no self-employment or property income above the threshold, MTD ITSA does not apply to you.
Not in scopeHMRC uses gross income (money in, before any costs) to determine MTD eligibility — not your taxable profit. A plumber earning £54k gross but only £26k profit after van, tools and fuel must still join MTD from April 2026. Per HMRC's published guidance.
Per HMRC's published guidance, MTD ITSA is being introduced in waves based on income threshold. No further extensions have been announced beyond the confirmed dates.
MTD for VAT became mandatory for all VAT-registered businesses from April 2022, regardless of turnover. Digital records and electronic VAT return filing via HMRC-recognised software is required. Per HMRC's VAT guidance.
All VAT-registered — mandatoryFrom 6 April 2026, MTD ITSA is mandatory for self-employed individuals and landlords whose qualifying gross income from self-employment and/or UK property exceeded £50,000 in the 2024/25 tax year (assessed from the 2024/25 Self Assessment return, due 31 January 2026).
£50,000+ gross incomeFrom 6 April 2027, the threshold drops to £30,000 in qualifying gross income. This brings hundreds of thousands more sole traders and landlords into the MTD regime, including those with modest property portfolios and lower-income freelancers.
£30,000+ gross incomeFrom 6 April 2028, the threshold falls further to £20,000. This is the currently legislated final threshold reduction, bringing the vast majority of self-employed people and landlords into MTD ITSA. Per HMRC's published Autumn Statement 2023 and Budget 2025 guidance.
£20,000+ gross incomeMTD for Corporation Tax remains in consultation with no mandatory start date confirmed as at May 2026. HMRC has indicated it will not mandate MTD for Corporation Tax until it has been tested thoroughly. Do not rely on any unofficial dates.
No date confirmedPer HMRC's published guidance, MTD ITSA replaces the annual Self Assessment return with a rolling quarterly reporting cycle, plus an end-of-year process.
Summary of all self-employment and/or property income and expenses for the period. No receipts needed — just totals by category.
Due: 7 AugustCumulative year-to-date figures submitted via your MTD software. Software auto-calculates from your digital records.
Due: 7 NovemberThird quarterly update. Your software submits directly to HMRC via the API. Calendar quarter election available if supported.
Due: 7 FebruaryFourth quarterly update. After this, you finalise your End of Period Statement and submit your Final Declaration by 31 January.
Due: 7 MayBy 31 January following the end of the tax year, you submit your Final Declaration — the replacement for the Self Assessment tax return. This is where you finalise allowances, add other income sources (employment, dividends, savings), and confirm your total tax position. Tax payment dates remain unchanged: 31 January and 31 July payments on account.
All software listed here is HMRC-recognised for Making Tax Digital. Per HMRC's guidance, you must use compatible software to keep digital records and submit quarterly updates. Full comparison, free options and pricing on our dedicated software pages.
UK-focused accounting built for sole traders and freelancers. The standout option for NatWest, RBS, Ulster Bank and Mettle account holders who get full access free. Excellent Self Assessment and MTD ITSA workflow.
Visit FreeAgent →Feature-rich cloud accounting for growing businesses. Handles MTD VAT and MTD ITSA across all paid plans. Best for businesses needing multi-user access, advanced reporting, and strong accountant integration.
Visit Xero →The cheapest major paid MTD ITSA option at £10/month (Sole Trader plan). Strong mobile app, mileage tracking, and receipt capture. Prices increased significantly in Jan 2026 for higher-tier plans.
Visit QuickBooks →Lowest monthly cost among major providers at £7/mo (Sole Trader). Built-in payroll at no extra cost on all plans — a genuine advantage for employers. Limited free tier allows up to 5 invoices/month.
Visit Sage →Clean, simple bookkeeping with a genuinely free entry tier covering MTD for VAT. MTD ITSA features are rolling out across plans. Good for budget-conscious sole traders with simple records.
Visit Pandle →The most generous free tier — up to 1,000 transactions per year at no cost. MTD for VAT is included free. Good for very small businesses with low transaction volumes needing a no-cost solution.
Visit QuickFile →Per HMRC's published penalty guidance, MTD ITSA uses a points-based system for late submissions, replacing the old £100 fixed penalty for Self Assessment.
| Situation | Points / Penalty | Notes from HMRC guidance |
|---|---|---|
| Late quarterly update | 1 penalty point | Each missed quarterly deadline earns one point. Points accumulate across tax years. |
| Late Final Declaration | 1 penalty point | Missing the 31 January Final Declaration deadline also earns one point. |
| Points threshold reached (quarterly filers) | £200 cash penalty | At 4 accumulated points, HMRC issues a £200 cash penalty. Reset by filing on time for 24 months. |
| Each further late submission after threshold | £200 per missed filing | Every subsequent late submission above the threshold costs a further £200. |
| Late payment — first 15 days | No penalty | No late payment penalty in the first 15 days after the due date. |
| Late payment — days 16–30 | 3% of tax owed | 3% penalty applies from day 16. Separate from the points regime for late submissions. |
| Late payment — day 31+ | 3% + daily interest | Further 3% from day 31, plus daily interest at HMRC's rate. Interest accrues on unpaid balance. |
Per HMRC's Budget 2025 announcements, HMRC indicated a degree of leniency during the first year of mandatory MTD ITSA (2026/27) for genuine technical issues and first-time errors. This does not eliminate the penalty regime — deadlines are still live — but HMRC has stated it will take a proportionate approach for early adopters. Always check current HMRC penalty guidance on GOV.UK.
This page summarises HMRC's published guidance. For your specific income position, our free matching service connects you with verified UK tax professionals who are already MTD-ready and can assess your exact threshold position.
Each guide covers its topic in depth — purpose-built so no two pages repeat the same content or target the same search terms.
Rated and reviewed from a taxpayer's perspective. Scored pros and cons, HMRC-recognition badges, and "best for" verdicts for sole traders, landlords and growing businesses.
Read the guide →Technical feature-by-feature specification tables. Built for accountants and agents comparing platforms across API depth, multi-client support, practice management, and HMRC integration.
Compare software →Complete pricing directory — every HMRC-recognised option from £0 to £50/month. Filter by budget, business type, and MTD compliance level. Includes bridging software options.
View all options & prices →Deep-dive into MTD ITSA — qualifying income rules, all three threshold waves, quarterly deadlines, End of Period Statements, and the Final Declaration explained clearly.
ITSA guide →Sole trader-specific guide: gross vs profit, the £50k test, side hustles stacking, CIS subcontractors, simplified expenses, digital record-keeping rules and common traps.
Self-employed guide →MTD for VAT is already mandatory for all VAT-registered businesses. Digital links rule, HMRC-approved software, flat rate scheme, agent setup, and what changes in 2026.
VAT guide →All answers based on HMRC's published guidance with direct GOV.UK links. Informational guide only — not personalised tax guidance.
Our free expert matching service connects you with verified UK accountants and tax specialists who are already set up for Making Tax Digital — at no charge to you.
Informational guide only — not personalised tax guidance. UK Tax Hero summarises HMRC's published guidance as a free information and expert-matching service. Nothing on this page constitutes personalised tax, financial, or legal guidance. Your MTD eligibility depends on your specific income position. Always verify your position on GOV.UK and consult a qualified tax professional before acting. UK Tax Hero is not regulated by HMRC, the FCA, or any professional body. Some links on this page are affiliate links — UK Tax Hero may receive a commission if you purchase via these links, at no additional cost to you. This does not influence our editorial content or ratings.
