Making tax digital for income tax: A guide for landlords and sole traders

Mandatory quarterly digital reporting is coming for sole traders and landlords. Discover the key changes, implementation timelines, and how early preparation can help you stay compliant.

HM Revenue & Customs (HMRC) is rolling out the next phase of its digital tax programme: Making Tax Digital for Income Tax Self Assessment (MTD for ITSA). This represents a significant change for sole traders and property landlords, and a fundamental shift in how income tax is reported.

With the first phase going live from April 2026, affected taxpayers should begin preparing now to ensure a smooth transition and avoid last-minute disruption.

What is Making Tax Digital for Income Tax?

MTD for ITSA is an extension of the Making Tax Digital initiative already familiar to many businesses through VAT. This time, it focuses on income tax and self-assessment for unincorporated businesses and landlords.

Under MTD for ITSA, qualifying taxpayers must:

• Keep digital records using HMRC-compatible software
• Submit quarterly updates of income and expenses
• Complete a Final Declaration at the end of the tax year, replacing the traditional Self Assessment return

Implementation timeline:

• From 6 April 2026: Individuals with qualifying income over £50,000
• From 6 April 2027: Threshold reduces to £30,000
• From 6 April 2028: Proposed threshold around £20,000 (subject to review)

Who will be affected?

MTD for ITSA will apply to:

• Sole traders and landlords with gross income above the thresholds
• Individuals with combined self-employment and property income exceeding the limits

Income considered for the threshold includes only self-employment and property income. Certain exemptions and digital exclusion criteria may apply.

What will change under MTD for ITSA?

• Mandatory digital record-keeping using approved software
• Quarterly submission of income and expense updates to HMRC
• A Final Declaration replacing the annual Self Assessment return
• Tax payment deadlines remain unchanged

Benefits and risks

Benefits

• Improved real-time visibility of financial performance
• Reduced year-end pressure and surprises
• Stronger compliance and better financial control

Risks

• Non-compliance if systems or digital links are not correctly set up
• Disruption caused by late preparation
• Some taxpayers may not realise they fall within scope until too late

How Ballards can support your MTD transition

Our team can help you:

1. Identify whether you fall within the MTD for ITSA scope
2. Review and optimise your current bookkeeping processes
3. Select and implement suitable accounting software
4. Manage quarterly update submissions
5. Offer flexible support – from full management to light-touch guidance
6. Prepare early to ensure a smooth and stress-free transition

Key dates to note

• If your income exceeds £50,000 in 2024–25, you will enter the regime from April 2026
• Quarterly updates will begin shortly after your start date
• Final Declarations remain due by 31 January following the tax year end

MTD for ITSA is more than a compliance change — it is an opportunity to modernise your financial processes, improve visibility and stay ahead of HMRC requirements.

Ballards is here to support you with software setup, digital record-keeping, quarterly submissions and year-end planning. If you’d like to discuss how MTD for ITSA will impact your business and how we can help you prepare, please get in touch with our team.

Disclaimer. This article has been prepared for information purposes only. Formal professional advice is strongly recommended before making decisions on the topics discussed in this release. No responsibility for any loss to any person acting, or not acting, as a result of this release can be accepted by us, or any person affiliated with us.