The government has delayed the implementation of Making Tax Digital for Income Tax Self-Assessment (known as ‘MTD for ITSA’). MTD for ITSA will now be introduced from 6th April 2026, with a phased rollout for affected taxpayers (Sole Traders and Landlords earning £50,000+ a year).

The threshold for those affected will then be lowered in April 2027 to Sole Traders and Landlords earning £30,000+. Further groups, including partnerships, will be brought into scope at a later date. 

The delays to MTD ITSA were down to the effects of the Covid-19 pandemic as well as to allow Sole Traders and Landlords more time to prepare for the shift to digital tax reporting. 

Who does MTD for ITSA apply to?

MTD for ITSA will apply to Sole Traders and Landlords with total business or property income above:

• £50,000 per year from April 2026.
• £30,000 per year from April 2027.

The threshold applies to total gross income or turnover across all self-employment and property income.

For example, if an individual has £28,000 of rental income and £25,000 of Sole Trader income, their total income of £53,000 means they will be affected by the new MTD rules in April 2026. 

What records need to be kept and submitted to HMRC?

Accounting records must be kept electronically (using compatible software or on a spreadsheet) and be filed quarterly with HMRC. The records must provide details of income and expenditure together with any other information specified by HMRC. 

A final end of period return will then be submitted after the tax year ends to complete the individual’s tax reporting.

Although the frequency of reporting is to change, the timing of tax payments will not and the current system of payments on account by 31 July and balancing payment by 31 January after the tax year should remain in place.

Penalties

A new points-based penalty regime applies to taxpayers required to submit under Making Tax Digital for Income Tax Self Assessment (MTD for ITSA).

Each late submission earns a point. Once the points threshold is reached, HMRC will charge a £200 fixed penalty. Points apply separately to each type of submission obligation (for example, quarterly ITSA or VAT), and additional points are not added once the threshold has been reached. Points expire over time if you meet all submission obligations on time, for quarterly submissions this period is 12 months.

Late payment penalties are separate and may apply if tax is paid after the due date. 

What other changes were announced?

HMRC has confirmed that partnerships are not yet required to join MTD ITSA. Further details on when different types of partnerships will be brought into scope will be confirmed by HMRC at a later date. 

What this means for Crunch customers

Our current Sole Trader Pro customers will have full MTD ITSA support included in their package. This includes software that makes quarterly submissions easy, their Self Assessment handled by certified accountants, and unlimited support for any questions.

Already using our award-winning accounting software? You’ll have the option to upgrade to our MTD ITSA compatible software. That way you still get the same great do-it-yourself service, but now with the ability to easily handle quarterly submissions. 

If you’re interested in how we could support you, you can get in touch with our Crunch Advisors. They’d be happy to talk you through your options