Big Changes Are Coming: What You Need to Know About Making Tax Digital for Income Tax (MTD ITSA)

If you’re a sole trader or landlord, there’s a big shift coming in how you report your income to HMRC, and it starts soon.

From April 2026, Making Tax Digital for Income Tax Self Assessment (MTD ITSA) becomes mandatory for many, and it’s important to prepare now so you’re not caught off guard.
Let’s break down what’s changing and what it means for you.

What Is MTD for Income Tax?

MTD is HMRC’s plan to make tax reporting more accurate, more efficient, and easier by replacing once-a-year tax returns with more regular digital reporting.

If you’re self-employed or a landlord earning over £50,000 annually, you’ll need to:

1. Keep digital records of your income and expenses using compatible software.
2. Submit quarterly updates to HMRC.
3. Submit one annual “final declaration” (which replaces your traditional tax return).

From April 2027, this will extend to those earning between £30,000 and £50,000.

What Are the New Filing Requirements?

Instead of a single Self Assessment tax return once a year, you’ll now submit:

• 4 quarterly updates (every 3 months)
• 1 final declaration at the end of the tax year

That final declaration is where you confirm all the figures, include any other income (like employment or investments), apply reliefs, and effectively calculate your tax bill. It replaces the need to file a Self Assessment tax return.

➡️ All of this must be done through MTD-compliant software

Who Does This Impact?

You’ll be affected by MTD ITSA if:

• You’re a sole trader or landlord
• Your total business and/or property income exceeds £50,000 from April 2026 (or £30,000 from April 2027)
• You’re not already in the pilot and haven’t voluntarily signed up

If you earn less than £30,000, HMRC says they are reviewing how to bring smaller businesses into the system, but nothing’s mandatory for you just yet.

What Stays the Same?

• You still pay tax annually, by 31 January following the tax year
• Your personal allowance, tax bands, and payment deadlines remain unchanged
• You’ll still need to track income and expenses accurately, just now in a digital format

What Do You Need to Do Now?

1. Check if you’ll be affected. Add up your self-employment and property income.
2. Start keeping digital records. If you’re still using paper or spreadsheets, it’s time to upgrade.
3. Choose MTD-compliant software. Programs like Xero or QuickBooks are popular options.
4. Work with AEL to get ahead of the changes, especially if you have multiple income sources or more complex affairs.

Don’t Wait Until It’s Mandatory!

At first glance, MTD ITSA might feel like more admin, but the reality is, it can help you stay more organised, reduce year-end surprises, and plan better financially.

We’re here to help you prepare, choose the right tools, and stay fully compliant without the stress.

If you’re unsure what this means for you or want help choosing software, please contact us.