For years, the annual Self Assessment tax return was the centrepiece of UK tax compliance for sole traders and landlords. You gathered your records, handed them to your accountant, filed by 31 January, and got on with your year.
That model ended on 6 April 2026.
Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is now live for the first wave of taxpayers. The shift is significant. Understanding what it requires, whether you’re in scope, and what ‘being ready’ actually looks like is worth getting right from the start.
What Making Tax Digital for Income Tax actually means
MTD ITSA replaces the single annual Self Assessment return with a new system built around two things: digital record-keeping throughout the year and quarterly updates submitted to HMRC via compatible software.
Four times a year, you send HMRC a summary of your income and expenses. At the end of the tax year, you submit a Final Declaration – the point where you confirm everything, claim your allowances, and settle your tax position. The deadline for that Final Declaration remains 31 January following the end of the tax year.
The reporting quarters fall on fixed dates regardless of your accounting year-end: 6 April to 5 July, 6 July to 5 October, 6 October to 5 January, and 6 January to 5 April. If you’d prefer calendar quarters, you can elect to report to 31 March, 30 June, 30 September and 31 December instead – worth considering if you’re already VAT-registered and filing on calendar quarters.
Who is in scope right now?
The rollout is happening in three phases based on qualifying gross income from self-employment and UK property – before expenses, before any allowances.
- Phase One (from 6 April 2026): Qualifying income above £50,000 in 2024/25
- Phase Two (from 6 April 2027): Qualifying income above £30,000 in 2025/26
- Phase Three (from 6 April 2028): Qualifying income above £20,000 in 2026/27
If your combined gross income from self-employment and property crossed the relevant threshold in the qualifying year, you’re in. Employment income, dividends, savings interest and pension income don’t count – it’s specifically trading and property income that matters.
One practical point worth flagging: once you’re brought into MTD, you stay in MTD. Your income dropping below the threshold in a later year doesn’t remove you from the system.
The penalty regime you need to understand
HMRC scrapped the old £100 fixed late-filing penalty for MTD. In its place is a points-based system already familiar from MTD for VAT. Each missed submission deadline earns one penalty point. Quarterly filers hit the penalty threshold at four points, at which point HMRC issues a £200 fine. Any further late submission beyond that threshold incurs an additional £200 until you reset the clock by filing on time for a sustained compliance period.
For the 2026/27 tax year only, HMRC introduced a soft landing: late quarterly updates in year one won’t attract penalty points. It doesn’t cover the Final Declaration. It doesn’t cover late payment. And it will not be extended into 2027/28.
Late payment penalties are separate and percentage-based: no penalty in the first 15 days, 3% from day 16, a further 3% from day 31, and daily interest after that.
What ‘digital record-keeping’ requires
Every transaction tied to your self-employment or UK property business must be captured in MTD-compatible software within a reasonable time of it being incurred. Paper records alone no longer satisfy HMRC’s requirements.
That means the pile of receipts in a drawer, the spreadsheet updated once a year before January, and the bank statement printed at year-end are no longer sufficient as standalone records. Your records need to be stored digitally in software that can communicate directly with HMRC’s systems.
Compatible software options range from full accounting packages – Xero, QuickBooks, FreeAgent and similar – through to bridging software that connects existing spreadsheets to HMRC. The key requirement is that the software is on HMRC’s approved list and can submit quarterly updates directly.
If you run multiple self-employed businesses, each business gets its own set of four quarterly submissions. A sole trader with a consultancy and a separate rental property submits eight quarterly updates per year plus the Final Declaration.
Where Bloom Financial Management fits in
MTD changes something practical about how your financial records need to work across the year. It’s no longer enough to reconcile everything in January. Your records need to be current, accurate and reviewable on a quarterly cycle.
That’s a significant shift for business owners who’ve historically kept light records and relied on their accountant to piece things together at year-end. It’s precisely where proper bookkeeping support makes a measurable difference.
That’s part of why we co-founded Solely Digital – a dedicated MTD compliance service built specifically for sole traders and landlords who need their quarterly submissions handled without the cost of routing everything through an accountant. For £39 a month, Solely Digital manages the whole process: software setup via Sage, receipt capture throughout the year, and filing your quarterly updates to HMRC on time, every time. It’s MTD compliance done for you, at a price that reflects its actual cost.
For clients who want more than compliance – clean bookkeeping throughout the year, monthly management accounts, visibility into their tax position before decisions need to be made – that’s where Bloom Financial Management sits alongside it. The two services are designed to work together, and many clients use both.
We also offer fractional Finance Director services for growing businesses navigating the broader implications of MTD. More frequent reporting creates more frequent visibility into your numbers. Used properly, that’s a planning advantage: you’re looking at your financial position four times a year rather than once, which supports better decisions.
What to do if you’re not sure where you stand
Start with your 2024/25 gross income from self-employment and property. If it’s above £50,000, you’re in Phase One and MTD is already live for you. If it’s between £30,000 and £50,000, Phase Two begins in April 2027 – close enough that preparation now is sensible rather than premature.
Check that your accounting software is on HMRC’s approved list. If you’re not currently using software, or your current setup isn’t MTD-compatible, that’s the first thing to resolve.
If you’re unsure about any of it – whether you’re in scope, whether your software qualifies, or whether your record-keeping is up to the standard MTD requires – that’s a conversation worth having before a quarterly deadline is missed rather than after.
Need MTD compliance sorted? Visit Solely Digital.
Quarterly submissions handled for you, from £39 a month: solelydigital.co.uk
Want the full picture — bookkeeping, management accounts and financial strategy alongside your MTD compliance? That’s Bloom.
Not sure if your setup is MTD-ready?
Get in touch and we’ll work through your specific situation – no obligation, just clarity.
