If you're self-employed or a landlord with income over £50,000, Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is now mandatory. It went live on 6 April 2026 and HMRC is no longer accepting annual self-assessments alone from the people it covers.
This post explains what actually changed, who it affects, what you need to do, and what happens if you ignore it. Plain English, no jargon.
What is MTD ITSA?
Making Tax Digital for Income Tax Self Assessment is the new digital-first system HMRC has rolled out to replace the annual self-assessment tax return for people with self-employed or rental income. Under the new rules you must:
- Keep digital records of your income and expenses (in HMRC-approved software)
- Submit a quarterly update to HMRC every three months
- Submit an end-of-period statement after the tax year ends
- Submit a final declaration confirming your total income and tax due
So instead of one self-assessment tax return a year, you now send HMRC four quarterly updates plus a final declaration. Five submissions a year instead of one.
Who does this apply to?
MTD ITSA applies if, in the 2024/25 tax year, your combined income from self-employment and property rental was more than £50,000. That combined figure is the key threshold — it does not matter whether it came from one source or several.
From April 2027, the threshold drops to £30,000. From April 2028 it drops again to £20,000. If you're below £20,000 you remain exempt for now, though HMRC has reserved the right to bring lower earners in later.
You are exempt entirely if you are: a partner in a partnership (for now), a trustee, or if you have specific digital exclusion reasons (for example, age, disability, or no reliable internet). Most people reading this post are not exempt.
What you actually need to do.
There are three things to get right. Miss any one of them and you risk penalties.
1. Use HMRC-approved software
Spreadsheets alone are no longer compliant. You need software that HMRC has certified as MTD-compatible. The main options are Xero, QuickBooks Online, FreeAgent, and Sage Business Cloud. We recommend Xero for most clients because it is the most intuitive and integrates with the widest range of banks and apps. Whatever you pick, make sure it's on HMRC's approved list.
2. Submit quarterly updates
Four times a year, you need to send HMRC an update summarising your income and expenses for the quarter. The deadlines are fixed to the tax-year quarters: 5 August, 5 November, 5 February and 5 May. You have until the 7th of the following month to submit, but earlier is safer.
3. File your end-of-period statement and final declaration
After the end of each tax year, you have until 31 January the following year to submit a final declaration. This confirms your total income from all sources and calculates your tax bill. Similar in form to the old annual tax return, but backed by the quarterly updates.
What happens if you ignore it?
HMRC operates a points-based penalty system for MTD ITSA. Every missed deadline earns you one point. Accumulate four points in a year and you trigger a £200 penalty. Points reset after a period of compliance, so one missed submission isn't catastrophic — but a pattern of missing them becomes expensive.
On top of that, if you fail to keep digital records at all, HMRC can issue an "inadequate records" penalty. And interest is charged on any unpaid tax from the original deadline, as it always has been.
How Barton handles MTD for clients
Every sole trader and landlord client pays one fixed monthly fee that covers the whole MTD service:
- We set up Xero with your business details, bank feeds, invoice templates and VAT codes where applicable.
- We run the bookkeeping each month so your records are always current — not just at quarter-end.
- We submit the quarterly updates to HMRC on your behalf, ahead of the deadline.
- We submit the end-of-period statement and final declaration as part of your year-end process.
- We flag any issues proactively — if your income is approaching the VAT threshold, if expenses look wrong, if cash flow is getting tight.
You do not need to learn Xero, HMRC's portal, or anything else. You tell us about new income or expenses as they happen, and we handle the rest.
What you need to do now.
If you are over £50k and you're not yet MTD compliant, you need to act fast. The first quarterly deadline is 5 August 2026 for Q1 (April–July). That sounds like ages away, but getting Xero set up properly, bank feeds connected, and a full quarter of records in place takes time. If you wait until July you will be scrambling.
If you're a Barton client, there's nothing you need to do — we've already got you set up. If you're not, get in touch for a free quote and we can have you fully MTD compliant within a week.
If you're self-employed or a landlord above the threshold and you're still filing once a year on paper, you're already out of compliance. The good news: fixing it takes a week, not months.
Frequently asked questions
Can I opt out of MTD?
No, not unless you qualify for an exemption on grounds of age, disability or digital exclusion. For most people, MTD is mandatory at the threshold.
Does MTD mean I pay more tax?
No. The rules for calculating what you owe haven't changed. What's changed is how you submit the information — more frequently, and digitally. Your tax bill should be the same.
I'm already VAT-registered and doing MTD for VAT — is this different?
Yes. MTD for VAT and MTD for Income Tax Self Assessment are separate systems. MTD for VAT has been mandatory since 2019 for most VAT-registered businesses. MTD ITSA is new for 2026 and applies to sole traders and landlords above the income threshold, whether or not they're VAT-registered.
What if I get this wrong?
Talk to an accountant, and ideally before the first quarter deadline. At Barton we handle the whole thing for clients as part of a fixed monthly fee. The peace of mind alone is usually worth more than the cost.
