Making Tax Digital for Income Tax (MTD for ITSA): What Landlords and the Self-Employed Need to Know

September 22, 2025

Making Tax Digital for Income Tax (MTD for ITSA): What Landlords and the Self-Employed Need to Know

Introduction

You may already be familiar with Making Tax Digital (MTD) if your business is VAT-registered. The next phase of the rollout involves Income Tax Self-Assessment (MTD for ITSA), which is set to transform how self-employed individuals and landlords report their income to HMRC.

Preparing early is crucial, not just to avoid fines, but to make the most of digital accounting software that simplifies your tax reporting and helps you stay in control of your finances throughout the year.

What is Making Tax Digital?

Making Tax Digital (MTD) is part of the Government’s Tax Administration Strategy, aimed at digitising the UK tax system and making HMRC one of the most digitally advanced tax authorities in the world.

Under MTD, you must:

• Keep digital records of income and expenses
• File tax updates using HMRC-approved software

Goals of MTD:

• Make the tax system more efficient and accurate
• Reduce errors and penalties
• Simplify reporting for taxpayers
• Help close the tax gap

For Income Tax, this means your annual Self Assessment tax return will be replaced with:

1. Quarterly Updates – report income and expenses every three months
2. End of Period Statement (EOPS) – a full year-end summary
3. Final Declaration – confirms total income and tax due

This phased reporting gives HMRC real-time insight into your income while helping you stay in control of your finances all year.

MTD for ITSA Timeline

The rollout will be phased based on income thresholds:

Effective Date | Who Must Comply
April 2026 | Sole traders & landlords earning over £50,000/year
April 2027 | Those earning over £30,000/year
April 2028 | Those earning over £20,000/year

Key historical milestones:
– April 2019 – MTD for VAT introduced for businesses over the VAT threshold
– April 2021 – Digital links mandatory for MTD VAT
– March 2015 – MTD first announced in the Spring Budget

Understanding this timeline allows you to plan ahead and avoid last-minute compliance issues.

Who Will Be Affected?

Sole traders with income above the relevant threshold
Landlords reporting rental income via Self Assessment

HMRC will notify taxpayers based on 2023/24 Self Assessment filings, but it’s wise to understand your obligations even before receiving a letter.

Key Changes Under MTD for ITSA

Quarterly Updates

Instead of a single annual return, you’ll submit income and expenses every three months.

Standard reporting periods:

Quarter | Period | Submission Deadline
Q1 | 6 April – 5 July | 7 August
Q2 | 6 July – 5 October | 7 November
Q3 | 6 October – 5 January | 7 February
Q4 | 6 January – 5 April | 7 May

Note: Periods can be customised to match your accounting cycle.

End of Period Statement (EOPS)

• Filed after the tax year ends
• Full breakdown of income, allowable expenses, and adjustments

Final Declaration

Confirms total income and tax due
Replaces the traditional Self Assessment if no other income exists

This phased reporting reduces errors, improves cash flow management, and prevents last-minute tax surprises.

Why Prepare Early?

Failing to prepare for MTD can lead to:

• Missed deadlines and fines
• Incorrect submissions
• Surprise tax bills and cash flow problems

Early preparation ensures you:

• Know your obligations
• Stay compliant
• Transition smoothly to digital reporting

Digital Record-Keeping

Digital records are mandatory under MTD.

Benefits:

• Accurate, real-time records
• Direct submission to HMRC with fewer errors
• Track your tax position throughout the yea r
• Reduced stress during year-end

Tip: Only use HMRC-approved accounting software—manual spreadsheets alone are no longer enough.

Penalties for Non-Compliance

• £100 fine for late submissions
• Daily penalties of £10/day (up to 90 days)
• Interest on late tax payments
• Possible loss of reliefs or allowances

How A2Z Accounting Solutions Can Help

We make your transition to MTD smooth and worry-free:

Explain exactly how MTD applies to your business

• Set up compliant digital record-keeping software
• File Quarterly Updates, EOPS, and Final Declarations on time
• Allow you to focus on your business while we manage compliance

Software benefits include:

• Automated tax submissions
• Mobile expense management
• Time tracking for accurate billing
• Invoice creation and automated payment reminders
• Daily automated bank feeds
• Real-time reporting on any device

Client benefits include:

• Transparent, fixed-fee pricing
• Dedicated expert accountant
• Unlimited support with same-day responses

Final Thoughts

Making Tax Digital (MTD) for Income Tax is one of the biggest changes in UK tax reporting for landlords and the self-employed.

Preparing early will help you:

• Save time
• Avoid penalties
• Keep your tax affairs organised and stress-free

Contact A2Z Accounting Solutions today to ensure you’re fully MTD-ready well before April 2026.

FAQs

Q: What is MTD for ITSA?

A: MTD for ITSA (Making Tax Digital for Income Tax Self-Assessment) is part of the UK Government’s digital tax initiative. It requires self-employed individuals and landlords to keep digital records and submit quarterly tax updates using HMRC-approved software.

Q: Who needs to comply with MTD for ITSA?

A: If you are a sole trader or landlord earning over £50,000 per year, you must comply from April 2026. The threshold lowers to £30,000 in April 2027 and £20,000 in April 2028.

Q: What software do I need for Making Tax Digital?

A: You must use HMRC-approved accounting software to keep records and file submissions. Spreadsheets alone are no longer sufficient. A2Z Accounting Solutions can help set up compliant software for you.

Q: How can an accountant help with MTD for ITSA?

A: A chartered accountant can guide you through digital tax requirements, recommend the best software, manage your quarterly submissions, and keep your tax affairs accurate and stress-free.