If you are a landlord or self-employed sole trader, the MTD for Income Tax (ITSA) will change the way you report income to HMRC. This document explains who needs to be compliant, when this will apply, and what you will need to do differently in clear language.

Summary: Monthly Tax Data for Income Tax uses digital reporting, four quarterly updates, the End of Period Statement, and the Final Declaration in place of the annual Self Assessment form. It will be applied to sole proprietors and landlords whose incomes exceed certain levels, from April 2026.

Table of Contents

1. What Does MTD Stand For in Income Tax?

2. Important Starting Dates and Thresholds

3. How "Qualifying Income" Is Calculated?

4. MTD Regulations for Landlords

5. What Will You Actually Be Required To Do?

6. In or Out of MTD?

7. Who's Excluded (For Now)

8. Frequently Asked Questions

What does MTD stands for in Income Tax?

Making Tax Digital for Income Tax (MTD for ITSA) is an alternative to the annual tax return, known as 'Self Assessment', for those individuals that qualify, through the implementation of the MTD system, which is based on the following elements:

• Digital record keeping using HMRC-compliant software

• Quarterly updates submitted to HMRC throughout the year

• Final Declaration at the year-end in lieu of the traditional Self Assessment return

The scheme will be applicable to sole proprietors and landlords with gross incomes surpassing HMRC-prescribed thresholds.

Important Starting Dates and Thresholds

The MTD for ITSA scheme is introduced in stages on the basis of gross income:

What period determines if you fall into this scheme? HMRC looks back to the gross income declared on your previous Self Assessment return:

• The April 2026 start date is based on your 2024/25 return

• The April 2027 start date is based on your 2025/26 return

• And so forth.

How "Qualifying Income" Is Calculated?

Qualifying income is your gross income, before expenses, combined from:

• Self-employment

• Property (rental income)

What doesn't count: PAYE wages, pensions, savings interest, and dividends are not included in qualifying income calculations.

MTD Regulations for Landlords

Do I get impacted as a landlord?

If your gross rental income surpasses the threshold that applies based on your starting date, then you fall under:

• Gross Income Over £50,000 -> included from April 2026

• Gross Income Over £30,000 -> included from April 2027

• Gross Income Over £20,000 -> included from April 2028

If below £20,000, then you’re not currently required; although this may be subject to change in the future.

I have both rental income and sole trader business income

Your rental income and self-employment income are combined in the calculation of the threshold test.

Are limited company landlords within the scope of MTD ITSA?

No. Rental properties in limited companies are not covered by MTD ITSA, which is taxed under corporation tax. Unincorporated landlords, that is, individuals who own properties individually, are subject to this change. If you receive your earnings as dividends, it will be reported under Self Assessment.

What happens to joint owners of property?

Each joint owner will be taxed based on his individual portion of income from the property compared to the threshold and not the entire property income.

Is furnished holiday let (FHL) income covered?

Yes. Furnished holiday let (FHL) income is included under the property income and will be included with other income from rental under MTD.

What Will You Actually Be Required Need to Do?

When you use MTD for Income Tax, the yearly tax return is replaced by:

• Digitization of recordkeeping using MTD compatible software.

• Four quarterly submissions to HMRC for each source of business or property income.

• End of Period Statement (EOPS) for each income source.

• Final Declaration instead of the old Self-Assessment form.

• A separate submission for each income source.

A separate submission for each income source:

In case you have multiple sources of income including your property income and self-employment, you will have to file separate quarterly submissions for each of these.

Which software do you need?

It is necessary to use HMRC-approved software that is compatible with MTD. A spreadsheet does not meet the requirements for digital record-keeping but bridging software could help to link the spreadsheet to HMRC’s system.

Quarterly deadlines

The update should be made approximately one month after the end of the quarter, based on the date of the tax year. The software or the accountant will keep track of the precise dates for your quarters.

Penalties in the first year

For 2026/27, it is the soft landing period. There will be no penalty points for delayed quarterly updates. The points-based penalty scheme is introduced from 2027/28.

In or Out MTD?

Is it possible to leave MTD if my income is less than the threshold?

No, but after being mandated, you have to remain below the threshold for a period of three years continuously before applying to exit from MTD.

Can I become voluntary under MTD before becoming mandatory?

Yes. Many landlords and sole proprietors who are below the threshold can opt to become voluntary early using the HMRC-approved software, to familiarize themselves with MTD.

Does MTD affect the amount of tax I pay?

No. MTD only affects the manner of reporting and not the taxation rules that apply. Allowable deductions, mortgage interest relief restrictions, and tax bands do not change.

Who's Excluded? (For Now)

• Partnerships: Partnerships do not fall within the scope of MTD ITSA at present; there is no agreed implementation date as yet, and these arrangements cannot opt into MTD ITSA voluntarily at present.

• Company directors, pensioners, and rental income only: All three groups are out of scope with regard to MTD ITSA; the criteria apply only to unincorporated sole traders and landlords.

• Landlords: As long as you have gross rental income that, when added to any self-employment income, is comfortably below £20,000, you are out of MTD ITSA.

Frequently Asked Questions

Q: What is the date of effect of Making Tax Digital for Income Tax? 
A: MTD ITSA became effective from 6 April 2026 for taxpayers whose gross qualifying income is more than £50,000, followed by £30,000 from April 2027 and £20,000 from April 2028.

Q: Is MTD software needed in case of having rental income less than £50,000? 
A: Yes, only if the taxpayer is mandated based on their relevant threshold and lookback year.

Q: Is a spreadsheet enough to be regarded as digital record keeping? 
A: No, but bridging software can be used to interface the spreadsheet with HMRC systems.

Q: Will the property owned by a limited company fall under MTD ITSA? 
A: No, since companies pay corporation tax and therefore do not fall under the scheme.

This information is for general guidance only and is based on rules effective as of August 2026. There have been a number of changes to the thresholds and criteria for MTD ITSA since it was initially announced. Please refer to the latest HMRC guidelines or consult your accountant.