Are you a sole trader, landlord, or both?
Do you earn from property or self-employment?
If yes, Making Tax Digital for Income Tax (MTD for ITSA) could soon apply to you.
The rules are changing.
Deadlines are coming.
Preparation now will save stress later.
This guide covers:
- Who must use MTD for ITSA
- Who is exempt
- How to check if you’re affected
- Examples to show what it means in practice
- Steps to take before the rules start
Who Must Use Making Tax Digital for Income Tax
You must follow MTD for ITSA if all the following apply:
- You’re a sole trader or landlord registered for Self Assessment
- You earn from self-employment, property, or both
- Your qualifying income is more than £20,000
Example: Self-Employed Builder
John is a self-employed builder earning £55,000 turnover in 2024–25.
His income is above £50,000, so he must use MTD from 6 April 2026.
Example: Landlord with Multiple Properties
Sarah rents out three flats, earning £48,000 rental income before expenses in 2025–26.
Her income is above £30,000, so she must use MTD from 6 April 2027.
What Counts as Qualifying Income
Qualifying income includes:
- Self-employed trading income before expenses
- Gross rental income before expenses
It’s important — HMRC looks at turnover, not profit.
If you earn £40,000 and spend £10,000 on expenses, HMRC still counts £40,000.
When You Must Start Using MTD for ITSA
Your start date depends on income level:
- Over £50,000 in 2024–25 → start 6 April 2026
- Over £30,000 in 2025–26 → start 6 April 2027
- Over £20,000 in 2026–27 → start date to be confirmed by new legislation
You can choose to sign up before the deadline.
Early adoption means you’ll get used to the process before it’s compulsory.
Who Does Not Need to Use MTD for Income Tax
You don’t need MTD for ITSA if:
- You qualify for automatic exemption (such as age or disability criteria)
- HMRC approves your exemption application
- Your qualifying income is £20,000 or less
Example: Part-Time Freelance Designer
Alex is a part-time freelance designer earning £14,000 turnover.
Her income is below £20,000, so she doesn’t need to join MTD unless her income rises.
If you’re exempt, you still submit an annual Self Assessment tax return.
Exemption doesn’t mean no tax reporting — just no quarterly digital submissions.
Checking If You Need MTD for ITSA
The rollout starts 6 April 2026.
You might be able to sign up early to test the system.
For tax years ending 5 April 2025 and 5 April 2026, check:
- Whether you must file a Self Assessment
- Which income sources you must declare
- How much self-employed or property income you’ll receive
Example: Seasonal Trader
Paul runs a market stall only in summer.
In 2024–25, his turnover is £52,000.
Even though his business is seasonal, he must join MTD from April 2026.
What Happens Before the Tax Year Starts
HMRC checks your Self Assessment each year.
If you exceed the threshold, they’ll write to confirm your MTD start date.
Example: HMRC Notification
HMRC reviews your 2024–25 return.
It shows £51,000 qualifying income.
They’ll send a letter telling you to join MTD by 6 April 2026.
Important:
Don’t rely solely on HMRC’s letter.
It’s your responsibility to know when you must join.
What to Do If You Must Use the Service
Get ready before the rules apply to you.
Here’s how:
- Choose MTD-compatible software — like QuickBooks, Xero, or FreeAgent
- Authorise the software to send updates to HMRC
- If using an accountant, decide how they’ll handle submissions
- Review your bookkeeping process so income records are updated regularly
Example: Early Preparation
Liam earns £53,000 turnover in 2024–25.
He signs up for MTD early in 2025.
By April 2026, he’s already confident using the system.
Why You Should Prepare Now
Leaving it late creates problems:
- Missed deadlines
- Penalties
- Rushed software setup
Preparing early means:
- Smooth transition to quarterly updates
- No last-minute panic
- Better cash flow management
Example: Avoiding Penalties
Emma delayed setting up MTD software until the week before her first deadline.
She struggled to import her data and missed the submission date — resulting in fines.
Benefits of MTD for Your Business (H2)
While it adds obligations, MTD also offers benefits:
- Real-time view of business performance
- Fewer year-end surprises
- Better tax planning opportunities
Example: Improved Tax Planning
Tom sees quarterly profits through his MTD software.
He realises he’s nearing a higher tax band.
He invests in new equipment before year-end, reducing his tax bill.
How We Can Help
At I Hate Numbers, we make MTD simple.
We’ll:
- Check if you need Making Tax Digital for Income Tax
- Choose and set up the right software
- Train you to use it confidently
- Keep you compliant and stress-free
Book a Call Today
Don’t wait for HMRC’s letter.
Book a free call with us today.
We’ll make sure you’re MTD-ready well before the deadline.
Plan It, Do It & PROFIT!