16th March 2026
Making Tax Digital for Income Tax, or MTD ITSA, is a significant change for self-employed people and landlords in the UK.
From April 2026, self-employed individuals with combined gross income from business and property over £50,000 are required to keep digital records and submit quarterly updates to HMRC.
Unlike the old annual Self Assessment system, this means submitting four summaries per year, in addition to the final end-of-year declaration. While this may sound daunting, the first year is expected to be fairly lenient, with HMRC focusing on education rather than strict penalties, giving taxpayers a chance to adapt.
The quarterly updates do not have to be perfect. They are primarily summaries of total income and expenses by category rather than detailed, fully reconciled accounts. Many adjustments, such as capital allowances, use-of-home calculations, or prepayments, can wait until the final year-end submission.
This means that small business owners can maintain relatively simple digital records without having to calculate exact tax liability every three months. It is also possible to use calendar quarters rather than tax-year quarters to make record-keeping simpler.
For landlords, there is an additional simplification. All UK rental properties can normally be reported together as a single "property business," so landlords do not have to submit separate quarterly reports for each property. Only Furnished Holiday Lets are treated differently. Using simple expense categories like repairs, mortgage interest, insurance, and professional fees is sufficient for the quarterly updates, while more complex calculations can be deferred to the annual declaration.
A common concern for many people is software costs. While fully featured accounting software can be expensive, it is possible to comply with MTD using a simple spreadsheet combined with low-cost bridging software. This allows you to keep digital records in a spreadsheet and transmit totals directly to HMRC, often for under £5 per month. Bridging software ensures compliance with the "digital links" requirement, so HMRC can receive data from your records electronically without manual retyping.
It is important to remember that the MTD threshold is based on gross income, not profit. This means all income from self-employment and property counts toward the £50,000 threshold in 2026, not the profit after expenses. For someone earning £39,000 from self-employment and £9,500 from property rental, the combined gross income is £48,500, just below the threshold. Even small additional income from freelance work, room rentals, or other sources could push total gross income over the limit, triggering MTD compliance a year earlier than expected.
Accountants often advise keeping digital records now, even if the threshold is not crossed, to make the transition smoother when the requirement eventually applies.
For many self-employed people, the practical impact of MTD is less about paying more tax and more about administrative burden and software costs. However, for those just under the threshold, careful planning can delay the requirement and reduce stress.
Ownership structures can also affect whether property income triggers MTD; for instance, property held in a limited company is taxed under Corporation Tax and does not count toward the MTD threshold. Jointly owned properties split income between owners, which can also affect who is required to comply.
In summary, MTD ITSA represents a shift from annual to digital quarterly reporting, but it is designed to be manageable for small businesses and landlords. Quarterly updates are summaries rather than full accounts, property income can be rolled into a single business, and low-cost digital tools make compliance feasible.
The key points to remember are that gross income counts, small extra income can trigger early compliance, and keeping digital records early makes the process much easier. For most people in the £30,000 - £50,000 income range, MTD will start in April 2027, giving plenty of time to prepare while still making digital record-keeping a permanent part of business routine.
Practical Tips for Staying Organized and Compliant with MTD
Start digital record-keeping early
Even if your income is just below the MTD threshold, start recording all income and expenses digitally now. This includes self-employment revenue, property rental income, and any smaller side incomes. Doing this early reduces stress and ensures you can comply immediately if you cross the threshold.
Keep property income in a single spreadsheet
All UK rental properties can usually be treated as one property business. Track rent, repairs, insurance, mortgage interest, and other costs in one simple spreadsheet. Only Furnished Holiday Lets need separate reporting. This makes quarterly updates far simpler.
Use bridging software for low-cost compliance
You don't need expensive full-feature accounting software. Bridging tools connect your spreadsheet totals to HMRC digitally. This satisfies the "digital links" requirement and keeps costs low—often under £5 per month.
Submit quarterly summaries, not detailed accounts
Quarterly updates are summaries of totals, not full reconciled accounts. Focus on total income and expenses by category. Detailed adjustments like capital allowances or personal use adjustments can wait until the final year-end declaration.
Monitor gross income, not profit
MTD thresholds are based on gross income. Small extra income from freelance work or subletting can push you over the threshold. Keep an eye on all sources of income to anticipate when you might be required to start MTD.
Plan ahead for software and admin deadlines
Even with simple spreadsheets, plan for quarterly submissions: Q1 by August, Q2 by November, Q3 by February, Q4 by May, with the final year-end declaration by January. Automating reminders in your calendar can prevent late submissions.
Review ownership structure if relevant
Property owned via a limited company or split with a spouse can change whether MTD applies. Discuss ownership structure with your accountant to see if it can help manage MTD requirements efficiently.
Bridging software options
Some low-cost MTD bridging tools expected to support ITSA include:
TaxCalc
BTCSoftware
Absolute Excel VAT Filer
Prices are often £30-£60 per year rather than monthly subscriptions.