Making Tax Digital for Income Tax (MTD ITSA)

Written By Jake Bailey

From April 2026, HMRC is changing how Self Assessment works under a new system called Making Tax Digital for Income Tax (MTD ITSA).

If you are a sole trader or landlord with total business/property income over £50,000, these changes will apply to you from April 2026. Those earning over £30,000 will follow from April 2027.

Here’s what you need to know.


What Is MTD for Income Tax?

Currently, most people submit:

  • One tax return per year

Under MTD ITSA, this changes to:

  • Digital record keeping

  • Quarterly updates to HMRC

  • An annual final declaration

Instead of one submission per year, there will now be five submissions.


Who Is Affected?

From April 2026, MTD ITSA will apply to:

  • Sole traders and landlords with total business/property income over £50,000 per year

From April 2027, it will apply to those earning over £30,000.

(Thresholds are based on gross income, not profit.)

Limited companies are not affected — this only applies to individuals currently filing Self Assessment for trading or property income.


The Good News: You Already Use MTD-Compliant Software

All our current clients use FreeAgent already, which is fully MTD-compliant.

This means:

  • Your records are already kept digitally

  • Your software is already compatible with HMRC’s systems

  • The structure required for MTD is already in place

Because of this, very little will change from your perspective.

You won’t need to move systems or learn a new platform.


What Will Change?

1) Quarterly Updates

Instead of reviewing everything once a year, we will now:

  • Review your FreeAgent records quarterly

  • Submit a summary update to HMRC

If you are already keeping your records up to date, this will feel very similar to how we currently operate — just on a more regular schedule.

Deadlines will be roughly:

  • July

  • October

  • January

  • April

2) Final Declaration

After the tax year ends, we will:

  • Make final adjustments

  • Confirm allowances and reliefs

  • Submit your final declaration (replacing the traditional tax return)

This ensures your tax position is accurate.

Will You Pay Tax Quarterly?

No.

Quarterly submissions are reporting updates only.

Payment dates remain aligned with the current system (31 January and 31 July).

What You Need To Do

For most of our clients:

  • Continue using FreeAgent as normal

  • Utilise Smart Capture within FreeAgent to capture your receipts and expenses in real time

  • Keep your records reasonably up to date

  • Respond to any information requests promptly

That’s it.

Because you are already on a compliant system, there is no dramatic change required.

How Forest Finance Can Support You

We can:

  • Monitor MTD deadlines

  • Submit quarterly updates on your behalf

  • Prepare your final declaration

  • Keep you compliant

  • Guide you through any changes

Our aim is to make this transition seamless.


Why Is HMRC Introducing This?

HMRC says the goal is to:

  • Reduce errors

  • Improve accuracy

  • Encourage real-time record keeping

  • Modernize the tax system

In reality, it increases reporting frequency — which means better organisation will be essential.

Frequently Asked Questions

Is this the same as MTD for VAT?
Similar concept, but this applies to income tax rather than VAT.

Do limited companies need to worry?
Not yet. This change applies to sole traders and landlords.

Will this increase accounting fees?
There is more reporting involved under MTD ITSA. We will always be transparent about pricing and support options.

Our Packages

We’ve done everything we can to keep the price as reasonable as possible for our clients while still maintaining the high level of service we hold ourselves too. As a result, we’ve developed three packages that can be found here.

Final Thoughts

MTD ITSA represents the biggest change to Self Assessment in years.

While it increases reporting requirements, it also encourages better financial visibility throughout the year.

We’re here to make sure you stay compliant without unnecessary stress.

If you have any questions, please get in touch.

Jake Bailey