If you’re a landlord or self-employed, you may have heard updates about Making Tax Digital for Income Tax and wondered what it actually entails. Essentially, the Self Assessment process is evolving toward a system of digital reporting.

Over the next few years, HMRC will move many taxpayers from annual paper returns to regular digital updates. For some, that sounds daunting. For others, it feels overdue.

This guide clarifies the regulations, detailing what MTD ITSA is, which businesses it affects, when it starts and how you can become ready to comply, all without jargon, panic or guesswork.

What Is Making Tax Digital for Income Tax (MTD ITSA)?

Making Tax Digital for Income Tax is a part of HMRC’s overall strategy to bring the UK tax system into line with modern web technologies. The aim is straightforward: to limit mistakes, improve accuracy, and usher tax reporting into the digital age.

MTD ITSA is HMRC’s new set of rules that will require some taxpayers to maintain digital records and report their income tax using compatible software.

Under the current Self Assessment guidelines, you bring together your figures for the year and submit a single return after the tax year has finished. With MTD ITSA, that’s not the case. Instead of a single annual return, you will submit regular updates to HMRC throughout the year using compatible software based on your digital records.

This is not about paying tax more frequently. It’s about reporting more often. Still, your final tax bill will be finalised after the new year, when allowances and adjustments are factored in.

The MTD ITSA approach mirrors the one already adopted for VAT, so it’s not unexpected. If you have encountered MTD for VAT, the principles are similar but applied to income tax.

Who Must Follow MTD ITSA?

MTD ITSA won’t affect everyone just yet. Whether you are affected depends on your income type and income level.

It applies to:

• Self-employed individuals (sole traders)
• Landlords with UK or overseas property income

The important number here is your qualifying income: the amount of gross business and/or property income you have before expenses.

Rollout thresholds at a glance

Source: Making Tax Digital for Income Tax Self Assessment for sole traders and landlords (GOV.UK)

If you have income from both self-employment and rent, HMRC takes both into account.

There are also limited exemptions. These include:

• People who are digitally excluded due to age, disability, or remote location
• Taxpayers whose income falls below the threshold
• Rare cases where HMRC agrees that using digital tools isn’t reasonably practical

Exemptions aren’t automatic. If you believe one of these applies to you, you will need to discuss it with HMRC or an adviser.

Important Dates to Know

MTD ITSA is being phased in, so there’s ample time for taxpayers to prepare.

Here’s the basic timeline:

• Now: A voluntary pilot is being run for taxpayers who wish to join early
• 2025: Broader testing, with more taxpayers able to join voluntarily
• April 2026: Mandatory for those with £50,000+ qualifying income
• April 2027: Mandatory for £30,000–£50,000 qualifying income

Source: Making Tax Digital dates you need to know (GOV.UK)

Immediate action is not required if you do not currently meet the entry criteria. That said, the sooner one becomes familiar with digital records, the less disruptive any eventual transition is likely to be.

This timeline is worth bookmarking. It addresses one of the most common questions we get: “Is there anything I need to act on right now?”

What Do You Need to Do?

MTD ITSA changes how you report, not how much tax you pay. In practice, compliance entails four key duties.

Keep digital records

You will need to track your income and expenses digitally. This can be done using accounting software or spreadsheets that connect to HMRC-approved software.

Use MTD-compatible software

You cannot submit MTD updates directly through HMRC’s online Self Assessment service; HMRC will only accept these submissions via MTD-compatible software.

Submit quarterly updates

Every quarter, you will submit a ‘summary of income and expenses’ to HMRC. These are updates, not bills, and they don’t commit you to final numbers.

Submit an annual final declaration

At the end of the tax year, you will review and adjust your totals to account for reliefs or adjustments, and finalise your tax position as is done today under Self Assessment.

To give context, picture a landlord who maintains two rental properties. They keep records rather than waiting until January to review a year’s worth of bank statements. Their software sends an update to HMRC every three months. Organisation is already complete by year-end, and the final declaration will be faster and more precise.

It’s a different rhythm, but one many people find easier once it becomes routine.

Benefits and Challenges of MTD ITSA

As with any significant change, MTD ITSA has both advantages and challenges.

On the plus side, it is generally easier to make more accurate records in digital form. There is less guesswork and fewer forgotten expenses when numbers are kept in real time. Many taxpayers prefer a clearer view of their income distribution, avoiding unexpected tax liabilities at year-end. Digital systems should reduce paperwork and make tax administration more manageable over time.

That said, there are things to look out for. Software isn’t free, and not everyone knows how to use digital tools immediately. Quarterly reviews may seem like extra pressure if you’re accustomed to handling everything annually. There is also arguably a learning curve, especially for landlords or sole traders who have got on just fine without ever using accounting software until now.

It’s important to remember that you don’t have to navigate these changes in isolation. With the proper setup and support, MTD ITSA becomes routine rather than daunting for most people.

How Reed & Co Can Help

MTD ITSA may be new for income tax, but not for our digital reporting. We have successfully helped many clients transition to Making Tax Digital for VAT and apply the same practical approach to income tax.

We can assist you in selecting and getting to grips with the most appropriate software, ensure your digital records comply with HMRC’s requirements, and handle quarterly updates and final declarations promptly and accurately. And equally important, we take the time to tell you what’s going on, so you always know where you stand and what’s coming next.

Whether you’re seeking full support or simply want professional guidance as the transition unfolds, we will help ensure the process feels clear, structured and manageable.

If you’d like clear advice on MTD ITSA or help preparing for the changes ahead, contact Reed & Co today. A short conversation now can remove uncertainty later and help you move into Making Tax Digital with confidence.