There’s something about a big tax change that makes people instinctively do one of two things. Get ahead of it early and feel quietly relieved later, or park it firmly in the “future problem” pile and deal with it when there’s no other choice. 

Making Tax Digital for Income Self Assessment (MTD ITSA) falls neatly into that category. Often shortened to Making Tax Digital for Income Tax or MTD for Income Tax, it’s HMRC’s move away from the once-a-year tax return towards a more regular digital way of reporting.

What is MTD for Income Tax?

Instead of one annual submission, those with qualifying income above the threshold will need to keep digital records using MTD-compatible software, send quarterly updates, and then finalise everything with a Final Declaration.

So, what does this actually mean in practice?

It means that MTD for Income Tax is being phased in gradually, and the date where you have to comply depends entirely on where you fall in the income thresholds.

Here’s how the thresholds currently work:

• If you’re a Sole Trader or landlord who earned £50,000 or more in the 2024/25 tax year from qualifying income, you’ll need to comply from the 2026/27 tax year.
• The threshold then drops to £30,000 or more from the 2027/28 tax year.
• It’s widely expected to fall again to £20,000 or more from 2028/29, although this hasn’t been formally confirmed yet.

For some people, mandatory MTD ITSA compliance is still a few years away. For others, it’s much closer. 

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What “registering” early means for MTD ITSA:

When people talk about registering early, they mean signing up before they are required to. For example, if your obligation starts in the 2027/28 tax year, you could choose to register this year instead so you can start getting familiar with the system ahead of time.

In other words, it is about giving yourself a head start rather than waiting until it becomes compulsory.

Why HMRC’s announcement might affect your decision

There is already a growing case for digital record keeping. It gives you a clearer view of tax obligations across the year, instead of one big surprise at the end. However, there is another factor worth knowing.

HMRC has confirmed a soft landing in the first year of mandation for ITSA (2026/27). That means no penalty points for late quarterly updates during that period. So if you miss a deadline, or your first few submissions are not quite right while you are still getting used to the system, you will not be penalised in the usual way straight away.

That is intentional. Moving from one annual return to four quarterly updates is a big shift, and the first year is designed to ease that transition. Which means a lot of people who don’t meet the £50k threshold are considering registering for MTD for IT early to get used to the change. 

Where a lot of people misread

This is where it’s easy to misread things. The soft landing does not mean the rules disappear.

You still need to:

• Keep digital records
• Submit quarterly updates
• Complete your final declaration

And importantly, late payment penalties and final deadlines still apply as normal. What’s paused is very specifically the points for quarterly updates in year one only. 

So what actually changes?

It’s less a “no consequences” period and more a learning phase. You are still expected to comply, but there is more breathing room while you get used to how everything works in practice.

That is where the decision around early registration shifts. It stops being about avoiding penalties and becomes about timing:

• Learn the system early, when the pressure is lower,
• or wait until it becomes fully embedded in your reporting cycle.
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Where this leaves you

If you’re a Sole Trader or landlord who recorded £50,000+ of income in the 2024/25 tax year, MTD for Income Tax is mandatory this tax year. That means digital records, quarterly updates, and full compliance as part of your normal tax routine.

If you’re under the threshold, you’ve still got time. Nothing forces you to act yet, but you do have a choice. You can wait until it becomes mandatory, or you can register early and use the softer early period to get familiar with how it all works.

Neither option is wrong. It just comes down to whether you’d rather adapt gradually, or deal with the change when it becomes unavoidable. Either way, the shift is coming. The only real question is when you want to meet it.

Your options with Crunch

MTD for Income Tax doesn’t have to be complicated, and it definitely doesn’t have to mean doing everything yourself. With Crunch, you can keep it pretty simple.

Use our Crunch Plus software if you want to stay in control but want MTD-compatible software that does a lot of the heavy lifting for you.. It’s built to handle digital records and keep you MTD-ready without the faff.

If you want a bit more confidence along the way, our MTD ITSA accounting plans give you access to expert support whenever you need it. So if something doesn’t quite make sense, there’s always someone to ask.

Or just choose somewhere in between. Use the tools day-to-day, and bring in support when you want a second pair of eyes on things on-demand. It’s really about choosing how involved you want to be, not trying to figure it all out upfront.

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