For years, HMRC's Making Tax Digital programme has been reshaping the way UK businesses report and pay tax. MTD for VAT is already well established, but the next major milestone — Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) — is set to transform how sole traders and landlords manage their finances from April 2026. If you currently file a Self Assessment tax return, there is a strong chance this affects you directly. The good news is that preparation now means a far smoother transition later.
What Is MTD for ITSA and Who Does It Affect?
MTD for ITSA replaces the traditional annual Self Assessment tax return with a system of quarterly digital submissions to HMRC, followed by an end-of-period statement and a final declaration. Rather than summarising an entire year's income and expenses in one go each January, you'll report them in four quarterly updates throughout the year.
From 6 April 2026, MTD for ITSA will be mandatory for:
- Self-employed sole traders with qualifying income over £50,000 per year
- Landlords with property income over £50,000 per year
From 6 April 2027, the threshold drops to £30,000, bringing a significantly larger group into scope. HMRC has indicated a further extension to those earning over £20,000 is planned, though a specific date has not yet been confirmed. Partnerships will be brought in at a later stage still.
It's worth noting that these thresholds apply to gross income — not profit. A sole trader with £55,000 in turnover but modest expenses is caught, even if their taxable profit is considerably lower.
Understanding the New Quarterly Reporting Cycle
The shift to quarterly reporting is the most significant practical change. Under MTD for ITSA, your reporting year will be divided into four periods:
- 6 April to 5 July
- 6 July to 5 October
- 6 October to 5 January
- 6 January to 5 April
Within one month of each period ending, you must submit a digital summary of your income and expenses to HMRC via compatible software. This is not a full tax calculation — it's a running summary. Think of it like sending HMRC a quarterly snapshot of your books.
After the fourth quarter, you'll submit an End of Period Statement (EOPS), where you make any accounting adjustments, claim reliefs, and confirm the figures are correct. Finally, a Final Declaration (which replaces the traditional SA100 return) ties everything together, including any other income sources such as savings interest or dividends.
Missing quarterly deadlines will attract penalty points under HMRC's new points-based system, so building a consistent monthly bookkeeping habit is no longer optional — it's essential.
Getting Your Records Into Digital Shape Now
One of the most common mistakes businesses make is leaving the transition too late. MTD for ITSA requires that your income and expense records are kept in compatible digital software — HMRC will not accept spreadsheets alone unless they are linked to compliant software via an approved bridging tool. Even then, using a dedicated platform is far more reliable.
Here's what "getting your records into shape" actually looks like in practice:
- Categorise every transaction consistently. HMRC's quarterly submissions require income and expenses split into specific categories (e.g., cost of goods, travel, professional fees). Start using these categories now so the transition is invisible.
- Reconcile your bank account monthly. If you're only looking at your books once a year at tax time, quarterly submissions will expose that gap immediately. Monthly reconciliation is the bare minimum.
- Digitise your receipts. Paper receipts stuffed in a drawer won't cut it. Photograph and log every business expense as it happens — AI-powered receipt scanning tools make this far quicker than it sounds.
- Separate business and personal finances. If you're using a single bank account for everything, open a dedicated business account now. This single step will save hours of reconciliation work every quarter.
Platforms like BizHub365 are built specifically for this landscape — offering double-entry bookkeeping, expense tracking, and direct HMRC API submission for MTD compliance, all without needing separate bridging software. For sole traders who want everything in one place, that kind of joined-up approach removes a significant administrative burden.
Choosing the Right MTD-Compatible Software
HMRC maintains a list of approved MTD-compatible software providers, but not all solutions are equal. When evaluating your options, consider the following:
- Direct API connection to HMRC — can the software submit quarterly updates and final declarations directly, without bridging tools?
- Ease of bank feeds — does it connect to your business bank account to pull transactions automatically?
- Receipt and expense capture — can you photograph receipts on your phone and have them matched to transactions?
- Landlord functionality — if you have property income, does the software handle multiple properties, rental income categorisation, and allowable expenses correctly?
- Accountant access — if you work with an accountant or bookkeeper, can they log in to review and submit on your behalf?
BizHub365, for example, covers all of these requirements — including MTD for ITSA direct submission, AI-powered receipt scanning, and a CRM for client-facing businesses — making it a natural fit for sole traders who want to consolidate their tools rather than juggle multiple subscriptions.
Whatever software you choose, don't leave the selection until early 2026. You need time to migrate your existing records, connect your bank feeds, and get comfortable with the quarterly submission process before it becomes a legal requirement.
Working With Your Accountant on the Transition
If you currently rely on an accountant to file your annual Self Assessment return, MTD for ITSA changes the nature of that relationship. Quarterly submissions mean your accountant needs access to up-to-date records far more frequently — ideally in real time, not in a bundle of receipts handed over each January.
Have an honest conversation with your accountant now about:
- Which software platform you'll both use and who holds the primary login
- How quarterly submissions will be reviewed and approved before the deadline
- Whether their fee structure will change to reflect quarterly rather than annual work
- How adjustments and tax planning will be handled mid-year when you can see provisional figures quarterly
For accountants managing multiple clients through MTD for ITSA, practice management tools that allow bulk client oversight will become invaluable. BizHub365 supports accountant access, making it straightforward for practices to review and submit on behalf of clients without switching between platforms.
The Opportunity Hidden Inside the Obligation
It's easy to view MTD for ITSA as yet another administrative burden imposed from above. But there is a genuine upside. Quarterly reporting forces you to stay on top of your finances in a way that most small business owners privately admit they should be doing anyway. When your books are current, you can see clearly whether you're on track to hit your income targets, whether your expenses are creeping up, and roughly what your tax liability will be — before it becomes an unwelcome January surprise.
Better visibility leads to better decisions. A sole trader who knows in October that they've had a strong year can make pension contributions or invest in equipment before the tax year ends, rather than scrambling after the fact. MTD for ITSA, at its best, turns your tax reporting into a genuine business management tool.
Conclusion: Start Now, Not in 2026
April 2026 may feel distant, but the businesses that will find MTD for ITSA straightforward are the ones building good habits today. Check whether you're in scope, choose compliant software, start reconciling monthly, and talk to your accountant about how your working relationship will evolve. The quarterly rhythm will feel natural far sooner than you expect — provided you give yourself enough runway to prepare. Don't wait for the deadline to force your hand.