Making Tax Digital for Self-Assessment — officially Making Tax Digital for Income Tax, or MTD ITSA — gets discussed as though it applies to every sole trader and landlord in the UK. It doesn’t. There’s a clear threshold, and a lot of confusion comes from people not realising which side of it they’re on.
There are really only two questions that matter:
- Do you have to keep digital records?
- Do you have to submit through MTD-compatible software?
The answer to both depends entirely on whether you’re actually within scope of MTD ITSA — and that’s determined by one number: your gross qualifying income. If you’re VAT-registered, a related set of rules already applies to you — see Making Tax Digital for VAT for how that works
The thresholds of Making Tax Digital for Self-Assessment
MTD ITSA is being phased in by income level, not introduced for everyone at once:
| Threshold | Mandatory from | Based on tax year |
| Over £50,00 | 6 April 2026 | 2024/25 return (year ended 5 April 2025) |
| Over £30,000 | 6 April 2027 | 2025/26 return (year ended 5 April 2026) |
| Over £20,000 | 6 April 2028 | 2026/27 return (year ended 5 April 2027) |
If your qualifying income is at or below the relevant threshold for the relevant year, you are not mandated into MTD ITSA — assuming you haven’t voluntarily signed up. Nothing changes for you. You can keep paper records, use a spreadsheet, prepare your figures manually, and file a normal Self Assessment return exactly as before.
What "qualifying income" actually means
This is where most of the confusion comes from. The threshold is based on gross income — turnover — not profit.
Take a self-employed person with turnover of £8,000 and profit of £2,000. They’re nowhere near any threshold and aren’t affected by MTD ITSA at all, regardless of how long they’ve been self-employed.
Now take a tour guide with turnover of £55,000 and profit of £8,000. Despite the modest profit, they’re mandated into MTD ITSA from April 2026, because the test looks at the £55,000 income figure, not the £8,000 left after expenses. This catches people out regularly — a business can look small on the bottom line and still be well within scope.
Qualifying income combines gross self-employment and property income together, not separately. Someone with £29,000 in trading income and £22,000 in rental income has £51,000 combined — over the £50,000 threshold — even though neither figure alone crosses it.
One thing qualifying income does not include: dividends. If you run your business through a limited company and take income as dividends rather than as a sole trader, those dividends sit outside MTD ITSA entirely and continue to be reported on the ordinary Self Assessment return regardless of amount. MTD ITSA is specifically about self-employment and property income — not company profits, salary, or dividends.
Worked through the years
| Qualifying income | 2026/27 | 2027/28 | 2028/29 |
| £12,000 | Not mandated | Not mandated | Not mandated |
| £25,000 | Not mandated | Not mandated | Mandated |
| £40,000 | Not mandated | Mandated | Mandated |
| £60,000 | Mandated | Mandated | Mandated |
Once you cross a threshold in any given year, you stay in MTD ITSA — there’s no automatic drop-out simply because income falls below it again for a single year. (HMRC’s published rules allow exit only after qualifying income has stayed below threshold for three consecutive tax years.)
What changes once you're mandated in
Below the threshold, nothing changes. Above it, everything does. Once mandated, you must keep digital records of income and expenses, submit quarterly updates to HMRC through MTD-compatible software, submit an End of Period Statement if required, and file your final declaration through compatible software rather than the ordinary HMRC online Self Assessment service.
HMRC maintains a list of compatible software. Spreadsheets can still play a role once you’re in scope, but only as a feed into compliant software via bridging software, not as the system of record on their own:
Quarter | Accounting Period | Deadline to submit to HMRC |
Quarter 1 | 6 April – 5 July | 7 August |
Quarter 2 | 6 July – 5 October | 7 November |
Quarter 3 | 6 October – 5 January | 7 February |
Quarter 4 | 6 January – 5 April | 7 May |
Final declaration – End of Year | Full tax year | 31 January following the tax year end |
What about payment on account?
This comes up regardless of whether you’re in MTD ITSA or not. Payment on account is HMRC’s system for spreading your tax bill across the year in advance, based on an estimate from your previous year’s liability, rather than paying everything in one go the following January. MTD ITSA doesn’t change the payment-on-account mechanism — the 31 January final declaration deadline remains the point your actual liability is reconciled against what’s already been paid. What changes is the visibility leading up to that point: quarterly figures rather than a single year-end reconstruction.
Penalties
There’s a soft-landing period: no penalties for missing a quarterly update deadline in your first year after mandation, though records still need to be kept and updates still need to be submitted. Penalties do apply to the annual obligations — late final declaration, late payment — and the points-based penalty system already running for VAT extends to income tax as individuals are brought into MTD.
Checking where you stand
The thresholds, not your turnover alone, determine whether any of this applies to you yet — and the gap between turnover and profit is exactly where people misjudge their own position. HMRC’s guidance on signing up covers registration once you know you’re in scope. If you’re not sure which side of the Making Tax Digital for Self-Assessment threshold you’re on, that’s worth establishing properly rather than guessing. Talk to a specialist.
