A Practical Guide to MTD for ITSA for Sole Traders and Landlords

Many sole traders and landlords are used to dealing with their tax once a year. Records are often pulled together close to the deadline, and the focus is on getting the return submitted on time rather than having a clear view of finances throughout the year. MTD for ITSA (Making Tax Digital for Income Tax Self Assessment) changes this approach completely. HMRC is moving towards a digital system where you must keep records electronically and report your income regularly instead of relying on a single annual submission.

For those who are not prepared, this shift can feel like a significant change. More frequent reporting, new software requirements, and different processes can increase the risk of errors, missed deadlines, and penalties if not managed properly.

The good news is that with the right preparation and systems in place, Making Tax Digital for ITSA can be straightforward to manage. In this guide, we explain what is MTD for ITSA, who it applies to, and how you can get ready with confidence.

What Is MTD For ITSA?

Making-tax-digital for ITSA is HMRC’s move towards a fully digital tax system. Instead of submitting one Self Assessment return each year, you will:

• Keep digital records of income and expenses
• Use MTD-compatible software
• Submit updates to HMRC every quarter
• Complete a final declaration at the end of the year

The aim is to make tax reporting more accurate and to give you a clearer view of your tax position throughout the year.

When Does MTD For ITSA Start?

MTD for ITSA will be introduced in phases:

• From 6 April 2026
  Applies to individuals with income over £50,000
  
• From April 2027
  Applies to those with income over £30,000
  

Further expansion is expected in future years.

Who Needs To Comply?

You will need to follow MTD for Income Tax Self-Assessment if:

• You are a sole trader
• You receive rental income
• Your total income exceeds the relevant threshold

The introduction of MTD for ITSA for sole traders means that many small business owners will need to change how they manage their tax reporting. Even if you work with an accountant, the rules still apply. Your adviser can manage submissions on your behalf.

What Are The Key Requirements?

Making tax digital for ITSA introduces four main requirements.

1. Keep digital records

You must record:

• Income
• Expenses
• Transaction dates

Records must be kept digitally. Paper records alone will not be accepted.

2. Submit quarterly updates

You will send updates to HMRC every three months.

These updates:

• Summarise income and expenses
• Provide an estimate of your tax position
• Do not create a final tax bill

3. Year-end reporting (EOPS and final declaration)

Under the current MTD for Income Tax Self-Assessment (ITSA) design, you will not submit a separate End of Period Statement (EOPS) as a standalone step. Instead, after your four quarterly updates, you will complete one year-end submission.

At the end of the tax year, you will:

• Review and confirm the income and expenses you have reported across the four quarterly updates
• Add any year-end adjustments, reliefs, and allowances
• Finalise your figures and submit a single final declaration by the required deadline following the end of the tax year, which replaces the Self Assessment return.

4. Final declaration

This replaces the current Self Assessment return.

It confirms:

• All income sources
• Your final tax liability

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What Are The Benefits Of Making Tax Digital For ITSA?

Although the system requires more frequent reporting, it can improve how you manage your finances.

Better visibility

You can see your estimated tax bill throughout the year, helping with planning.

Improved accuracy

Digital records reduce errors and missing information.

Less year-end pressure

Regular updates mean less work in January.

Stronger financial control

You have up-to-date information on business performance.

What Challenges Should You Expect?

Many businesses will need to change how they currently work.

Moving to digital systems

Manual records and spreadsheets will need to be replaced or linked to software.

More frequent reporting

Quarterly updates require consistent record-keeping.

Learning new tools

There may be a short learning period when adopting software.

Additional costs

Software and advisory support may increase expenses.

How do penalties work under MTD?

HMRC has introduced a penalty points system for late submissions.

• You receive one point for each missed deadline
• Once the threshold is reached, a £200 penalty is issued
• Further missed deadlines lead to additional penalties

Late payments can also attract extra charges, including daily interest.

How To Prepare For MTD For Income Tax Self-Assessment

Starting early will make the transition easier. Here are practical steps to take:

Review your current system

Identify how you currently track income and expenses.

Choose MTD-compatible software

Look for software that:

• Connects directly with HMRC
• Automates data entry
• Provides clear reports

Move to digital records

Start keeping digital records now to build a routine.

Keep records regularly

Update your records weekly or monthly to avoid last-minute work.

Speak to a tax adviser

Professional advice can help you stay compliant and plan effectively.

Understanding MTD for ITSA for sole traders early will help you avoid disruption and stay in control of your finances as the rules come into force.

Why Early Preparation Matters

Leaving preparation until the last minute can lead to:

• Errors in submissions
• Missed deadlines
• Penalties

Starting now gives you time to adjust your processes and understand the system.

Why Choose Apex Accountants For MTD For ITSA?

Making Tax Digital for ITSA is more than a compliance change. It changes how you manage your tax throughout the year. While it introduces new processes, it also gives you better visibility and control over your finances.

At Apex Accountants, we support sole traders and landlords in adapting to these changes with confidence. We focus on practical solutions that fit your business, helping you stay compliant without adding unnecessary stress.

Our team can support you with:

• Setting up MTD-compatible software
• Moving your records to a fully digital system
• Managing your quarterly submissions
• Reviewing your figures to reduce errors
• Providing ongoing tax advice and support

We do not just help you meet deadlines. We help you build a system that works for you throughout the year.

If you are unsure how Making Tax Digital for ITSA applies to you, now is the time to take action. Early preparation can save time, reduce risk, and give you clarity over your tax position. Speak to Apex Accountants today and get ready for MTD for ITSA with confidence.