Mandatory MTD for ITSA

From 6 April 2026, self-employed traders and unincorporated landlords with combined trading and property income of £50,000 or more in 2024/25 will need to comply with Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA).

Clients within MTD for ITSA from 6 April 2026 will need to sign up with HMRC if they have not already done so.

Clients within MTD for ITSA will need to keep digital records and file quarterly updates and a final declaration using MTD-compatible software.

Penalties under MTD for ITSA

New penalties apply under Making Tax Digital, which replace the existing late submission and late payment penalties.

Under the new regime, where a submission deadline is missed, a penalty point will be issued. When the penalties reach the relevant threshold, a penalty of £200 is charged. The penalty threshold is four penalty points for quarterly returns, such as the quarterly update, and two penalty points for annual returns, such as the final declaration. However, HMRC will not charge penalties for quarterly updates in 2026/27.

Where a person is below the four-point penalty threshold, points will be removed automatically after 24 months. However, if a person has reached the four-point threshold, penalty points will be removed after 24 months only if the taxpayer has submitted all their quarterly updates and tax return on time for 12 months and all outstanding quarterly updates and tax returns for the previous 24 months have been submitted.