Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is already live for the highest-income cohort, and two further waves are on the way. From April 2027, the threshold drops to £30,000. From April 2028, it falls again to £20,000, pulling thousands more sole traders and landlords into quarterly digital reporting. For UK accounting practices, this is not a distant compliance date. It is a client segmentation and capacity planning exercise that needs to start now.
This article sets out exactly what the coming MTD for ITSA thresholds mean, when they bite, and how practices can prepare their client base and their own workflows in good time.
What Is MTD for ITSA?
MTD ITSA replaces the annual Self Assessment return for those in scope with digital record-keeping and quarterly updates submitted to HMRC through compatible software. A Final Declaration, which has replaced the old End of Period Statement (EOPS) process, confirms the figures at year-end. The aim, according to HMRC, is more accurate, more frequent reporting that reduces error and closes the tax gap.
The regime applies to sole traders and landlords whose combined gross trading and property income exceeds a specified threshold, assessed against a prior tax year’s Self Assessment return. It does not currently apply to partnerships, companies, trusts, or estates.
What Are the MTD for ITSA Thresholds and Deadlines?
The phasing for Making Tax Digital is based on gross income, not profit, and each wave is tested against a specific earlier tax year:
- From 6 April 2026: Sole traders and landlords with combined gross income above £50,000, tested against the 2024/25 Self Assessment return, are mandated. Quarterly submission MTD ITSA deadlines for this cohort are 7 August, 7 November, 7 February, and 7 May, with the Final Declaration due by 31 January following the tax year.
- From 6 April 2027: The threshold falls to £30,000, tested against 2025/26 income. This wave covers the 2027/28 tax year.
- From 6 April 2028: The threshold falls again to £20,000, tested against 2026/27 income. HMRC estimates this expansion will bring roughly 900,000 additional taxpayers into MTD.
How Is Qualifying Income Calculated?
Gross income is aggregated across all trading and property sources reported on an individual’s return, before expenses, mortgage interest, or capital allowances are deducted. A client with £22,000 in rental receipts and £15,000 in self-employment income, for example, would be assessed on the combined £37,000, not on either figure in isolation. Where a business operated for only part of the relevant tax year, receipts are annualised for the purposes of the threshold test.
For jointly held property, each landlord’s own share of receipts is what counts, not the total for the property.
Find out what are the common mistakes firms are making while implementing MTD for ITSA for their clients.
Why Does the £20,000 Wave Matter More for Practices?
The £50,000 and £30,000 cohorts are relatively contained and often already engaged with digital bookkeeping. The £20,000 threshold is different in scale. It captures a much broader base of smaller landlords, side income earners, and part-time traders, many of whom have never used accounting software and may not think of themselves as needing an accountant’s help at all.
For practices, this means:
- A larger, more fragmented client base entering MTD at once, with less digital maturity on average.
- Increased demand for software selection and onboarding support, particularly for clients still working from spreadsheets or paper records.
- Pressure on capacity around each quarterly deadline, requiring practices to review resourcing well ahead of 2028.
- A commercial opportunity to formalise pricing and service tiers for digital record keeping and quarterly submissions before demand peaks.
How Should Practices Prepare Now for The MTD for ITSA New Waves?
Waiting until closer to April 2027 or 2028 leaves little room to manage the transition well. Practices that are ahead of the curve are already:
- Segmenting client lists by current and projected qualifying income to identify who falls into each wave.
- Reviewing which clients will need to move off spreadsheets and onto MTD-compatible software.
- Communicating early with clients who are close to a threshold, so income is monitored rather than discovered retrospectively.
- Building quarterly submission cycles into practice management systems now, rather than adapting under deadline pressure later.
- Considering fee structures that reflect the additional quarterly workload, ahead of the busier compliance calendar.
Making Tax Digital has moved past the stage of being a future reform. It is a live regulatory requirement with a clear, published timetable, and each wave brings a meaningfully different client profile into scope. Read how HMRC Making Tax Digital is transforming UK tax compliance.
FAQs
When does the £20,000 MTD for ITSA threshold come into effect?
What income counts towards the MTD for ITSA threshold?
Do landlords with jointly owned property need to include the full rental income?
No. Each individual is assessed only on their own share of the jointly held property’s receipts, not the total rent received.
What replaces the Self Assessment return under MTD for ITSA?
Get Ahead of the Next MTD for ITSA Wave
Whether your client base is approaching the £30,000 threshold in 2027 or the £20,000 threshold in 2028, early preparation protects both compliance and capacity. Befree works alongside practices to plan for MTD for ITSA transitions with confidence.
Get in touch with our team to talk through your practice’s readiness.