Making Tax Digital for the self-employed

We explore everything sole traders and the self-employed need to know about Making Tax Digital for ITSA.

MTD for The Self Employed

Making Tax Digital (MTD) rules will be extended to income tax from 6 April 2026. If you’re a sole trader or landlord earning above £50,000 annually, you’ll need to sign up ahead of the deadline.

While some sole traders registered for VAT will already be familiar with Making Tax Digital rules, others will need to get cloud-based accounting software in place so that they can comply with MTD for ITSA.

What does Making Tax Digital mean for the self-employed?

Sole traders and landlords with an overall income above £50,000 need to have HMRC-recognised software in place before 6 April 2026. This is when the first phase of Making Tax Digital for Income Tax Self Assessment (ITSA) comes into effect. Those with income above £30,000 will be mandated from April 2027.

Instead of using HMRC’s website to file returns, you’ll need to keep digital records and use compatible software. From 6 April 2026, you’ll need to submit quarterly updates to HMRC, as well as a Final Declaration that includes all other taxable income by 31 January every year.

VAT-registered sole traders will already be familiar with MTD rules. From April 2019, MTD rules became mandatory for all VAT-registered businesses earning above £85,000. From April 2022, all VAT-registered businesses need to use digital record keeping and submit VAT returns with MTD software.

The VAT registration threshold has been upped to £90,000, as of 1 April 2024. If you’re earning on or above this threshold, you need to register for VAT. HMRC will automatically sign you up for MTD when you register for VAT.

The benefits of MTD for ITSA for the self-employed

If the idea of a digital tax submission process feels overwhelming, rest assured that there are plenty of benefits for self-employed people.

Already, people who fully-embraced cloud-based software for MTD for VAT have experienced benefits such as time savings, increased VAT confidence, greater insight and financial control.

Here are some additional benefits of the MTD for ITSA system:

  1. Improved accuracy: When software takes care of the numbers, there are fewer chances for human error. For example – automating your data entry, so that bookkeeping records automatically populate your quarterly updates means you don’t need to manually type them into your returns.
  2. Better tax planning: Every time you submit a quarterly update, you get a clearer view on what your total tax liability will be. This helps with tax planning and cash flow management, because you can prepare for your bill ahead of time.
  3. More manageable bookkeeping: While you’ll need to submit more updates to HMRC, those updates contain less information. This means that you can turn your bookkeeping into a bitesize monthly or quarterly task – instead of an annual rush.

But you don’t need to wait until the HMRC requirements for ITSA come into place to experience these benefits. Cloud-based accounting software is the ideal tool for streamlining tax compliance for self employed people. By adopting it now, you can get more visibility on your tax position and cash flow, turn annual bookkeeping into a bitesize task, and reduce the chance of human error in your submissions.

When does MTD for ITSA start for the self-employed?

For sole traders and landlords earning above £50,000 annually, MTD for ITSA starts from April 2026.

For sole traders and landlords earning above £30,000 annually, MTD for ITSA will start from April 2027.

Following the 2023 Autumn Statement, MTD for ITSA for those earning below £30,000 will remain under review. This gives HMRC time to assess the initial phases of MTD for ITSA and ensure software exists to support smaller businesses.

When is the deadline for MTD for ITSA?

MTD for ITSA was due to start in 2024 but was delayed to 2026.

Due to the new Basis Period Reform, everyone will have a digital start date of 6 April 2026. While the deadline might seem a little way off, you can sign up voluntarily to start getting used to MTD rules. Find out whether you’re eligible for early MTD for ITSA registration here.

Do all self-employed people have to go digital?

If you meet the criteria then you have to comply with MTD for ITSA, unless you’re digitally exempt. Foster carers and those who cannot get a National Insurance number are also exempt from MTD for ITSA.

All self-employed people and landlords with a total income (from business or property) above £50,000 will need to follow the new ITSA tax filing process from 6 April 2026. Sole traders and landlords earning above £30,000 will follow in 2027.

Sole traders earning below the threshold can continue to use the old HMRC system for filing their returns. If you own multiple businesses, the income earned from all of them contributes to the £50,000 threshold. Our FAQs for landlords are a great resource if you earn property income.

How do I sign up for Making Tax Digital for ITSA as a self-employed person?

Signing up for MTD for ITSA requires that you have HMRC-recognised software in place first. That’s because you need to sign up to MTD for ITSA through your cloud-based software, instead of on the HMRC website.

Make sure you have HMRC-recognised software in place and ask your software provider how to sign up for MTD for ITSA. You’ll also need your business name, business start date, email address, National Insurance number, accounting period, and accounting type to apply. Read HMRC’s guidance on signing up for more information.

What do I need to submit for MTD for ITSA?

From 6 April 2026, self-employed people and landlords earning above £50,000 will need to keep digital records of income and expenditure. There are two parts you’ll need to submit for MTD for ITSA:

  1. Quarterly updates. These should include all business income and expenditure.
  2. Final Declaration. This is where you’ll need to share details of all other taxable income, including investments and savings interest.

Before the 2023 Autumn Statement, an End of Period Statement (EOPS) was also an MTD for ITSA requirement. But the government has now removed this, following feedback that the EOPS duplicates information covered in the Final Declaration. Find out more about what you need to submit for MTD for ITSA.

Can an accountant or bookkeeper sign a sole trader up for MTD for ITSA?

Yes. Speak to your accountant or bookkeeper about signing up for MTD for ITSA early, so you have plenty of time to familiarise yourself with the system.

Your accountant can submit your quarterly updates and Final Declaration using your cloud-based accounting software. Some bookkeepers can also make these submissions on your behalf, but you’ll need to check this with them first.

How do I calculate income for MTD for ITSA?

All property and business income contributes to the £50,000 threshold. For example, if you’re a freelancer earning £35,000 per year from your business, and £20,000 per year from property, you’ll be above the threshold and will therefore need to comply with MTD for ITSA.

If you have multiple businesses or sources of property income, you need to add up the income from all of them to work out whether you’re above the threshold. The same will apply in 2027, when the income threshold for MTD for ITSA is lowered to £30,000.

Can the self-employed opt-out of MTD for ITSA?

No. If you’re above the MTD for ITSA threshold of £50,000, Making Tax Digital is not optional from 2026. However, people that are digitally exempt do not need to follow MTD rules. This could include people who are elderly, have a disability, or live in a remote location. Foster carers and people who cannot get a National Insurance number are also exempt from MTD for ITSA.

You can request to be made exempt from MTD for ITSA on the website.

MTD software for the self-employed

Using HMRC-recognised software will enable sole traders and the self-employed to keep digital records of income and expenses and submit their quarterly updates and annual submissions directly from the platform.

The self-employed should also look for software with additional features that reduce the administrative burden of digital record keeping, like invoicing and expense capture.

Can the self-employed use spreadsheets for MTD?

You might have heard about bridging software. It was popular during the first phase of MTD for VAT because it allowed businesses to continue using their spreadsheets for VAT returns.

With MTD for ITSA, the self-employed will need to submit quarterly statements and a Final Declaration, not just a single annual return. This makes keeping all of the relevant records in a spreadsheet more difficult. And you’ll also need to keep to the digital linking rules.

There’s no risk of losing, deleting, or corrupting spreadsheet cells in cloud-based accounting software. HMRC-recognised software acts as safe storage for all your financial records and will also help ensure compliance with MTD.

Do the self-employed need to sign up for MTD for VAT and MTD for ITSA separately?

Yes. The systems are separate, so you need to sign up for MTD for ITSA separately. Some sole traders will need to follow MTD for VAT and MTD for ITSA rules, whereas others will only need to sign up for MTD for ITSA. If you’re not sure if MTD for VAT applies to you, read this guide.

Can you deregister from MTD for ITSA as a self-employed person?

From April 2026, once you’ve signed up to MTD for ITSA, you cannot deregister unless you have a turnover below £30,000 for three consecutive years. If this is the case, you will be able to deregister from MTD for ITSA and return to classic Self Assessment. This also applies to sole traders and landlords who sign up voluntarily

If you’re earning below £30,000 annually, you do not need to sign up for MTD for ITSA. You can continue using the old self-assessment system.

People earning below £30,000 will likely be mandated once the ITSA rollout begins, but there’s no deadline for this yet. You can still join voluntarily if you want to claim some of the benefits of digital record keeping and software submissions.

If you need to deregister from ITSA because you’re no longer self-employed, you can contact HMRC through your online tax account or by phone.

How should I prepare for MTD for ITSA as a self-employed person?

Make sure you have HMRC-recognised software in place, and you’re signed up to MTD for ITSA before 6 April 2026. Check out our MTD deadlines if you need to brush up on key Making Tax Digital dates for the self-employed.

Sign up early if you can, or talk to your accountant or bookkeeper about signing up for MTD for ITSA. The more time you spend getting used to new digital tools, the easier you’ll find the transition to Making Tax Digital.

Want more information on Making Tax Digital?

You can keep up to date with the latest on MTD by bookmarking our Making Tax Digital resource hub and MTD for ITSA page.

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