Making Tax Digital for Income Tax (MTD ITSA) starts on 6 April 2026 for sole traders and landlords whose qualifying income is above £50,000. If you are reading this and have not yet chosen software or set up digital records, the timeline is tight.

This checklist walks you through the practical steps every small business needs to take before the deadline — from picking compatible software to understanding what HMRC expects each quarter.

Who should start now?

HMRC expanded MTD for Income Tax in stages. You must begin using MTD-compatible software if you are a sole trader or landlord registered for Self Assessment and your qualifying income exceeds the threshold for the relevant tax year.

For the 2024 to 2025 tax year, the threshold is £50,000. If your qualifying income — total self-employment income before expenses plus property income — was above this figure, you need to be set up by 6 April 2026.

If your qualifying income falls between £30,000 and £50,000, you will need to join MTD from 6 April 2027. Below £30,000, the next mandatory phase arrives from 6 April 2028. But if you have one income stream above £50,000, the 2026 deadline applies regardless of your other earnings.

You still need to submit a final Self Assessment tax return for the tax year before you start using MTD.

Step 1 — Confirm your MTD eligibility

Before spending time on software, confirm whether you are in scope. HMRC publishes an online tool to check your eligibility and the date you need to start.

Two conditions must be met to sign up:

• You are registered for Self Assessment.

• You have submitted a tax return in the last two years.

If HMRC reviewed your 2024 to 2025 return and your qualifying income was over £50,000, you should have received a letter confirming that you need to use MTD. If you did not receive a letter, it remains your responsibility to check your eligibility and sign up in good time.

Source: GOV.UK — Find out if and when you need to use Making Tax Digital for Income Tax

Step 2 — Choose MTD-compatible software

MTD does not mean you must buy a brand-new accounting package. It means you must use software that HMRC recognises for Income Tax purposes. This is a critical distinction.

A package that is MTD-compatible for VAT is not automatically compatible for Income Tax. HMRC maintains separate recognition lists for each tax type.

Your software options fall into two categories:

Software that creates digital records

Full accounting packages such as Xero, QuickBooks, Sage, or FreeAgent can create and store your digital records, send quarterly updates, and submit your tax return — all within a single tool. Many also let you link to your business bank account to import transactions automatically.

Bridging software

If you prefer to keep your records in spreadsheets, bridging software can connect to them and pass data to HMRC. Bridging software is sometimes sold alongside your accounting package or as a standalone product. It creates the required digital link between your spreadsheet records and HMRC's systems.

What to check before committing

Before purchasing, confirm the following:

1. The software is listed by HMRC as compatible with MTD for Income Tax, not just VAT.

2. It supports quarterly updates — some bridging tools only handle the Final Declaration.

3. It covers every income source you need to report.

4. It lets you submit quarterly updates and your tax return.

5. It works with your chosen accounting period (the standard tax year runs 6 April to 5 April; some software allows calendar-year updates).

If your business already uses VAT-compatible software, check whether the same product supports MTD for Income Tax. Using one platform for both purposes simplifies maintenance.

Source: GOV.UK, "Choose the right software for Making Tax Digital for Income Tax" (last updated 13 July 2026)

Step 3 — Set up digital records

MTD requires you to create and maintain digital records of your self-employment income and expenses, and your property income and expenses. You do not need digital records for other income sources such as pensions, dividends, or savings — but you must still report those figures on your tax return through your software.

The rule is that records must be captured in your MTD software within a reasonable time of each transaction occurring. HMRC accepts that "reasonable" means by the end of the relevant quarterly period. The records themselves must be in digital form, with a digital link between the source data and the quarterly update you submit.

What counts as a digital link? A direct API connection between your software and HMRC satisfies the requirement. Importing transactions from a bank feed counts. An Excel cell reference within the same spreadsheet is acceptable. Bridging software that connects your spreadsheet to HMRC creates the required digital link.

What does not count? Keeping your main records in a physical paper ledger and then entering totals into software at the end of the year does not meet the requirement. The source data must be digital.

Open a fresh accounting period in your chosen software on 6 April 2026 — the first day of the new tax year. Do not wait until the first quarterly update deadline to begin.

Step 4 — Understand the quarterly update schedule

MTD replaces the single annual Self Assessment return with four quarterly updates and a Final Declaration. Understanding the timeline is essential for cash-flow planning.

The four quarterly updates cover income and expenses for each quarter. They are summaries — not tax returns. HMRC uses them to keep an ongoing view of your tax position throughout the year.

Each business you run requires separate quarterly updates. If you are both a sole trader and a buy-to-let landlord, you will submit four updates for each income stream, plus a single Final Declaration combining all your sources. That means up to eight quarterly updates per year for some businesses.

Your first quarterly update covers the period from 6 April to 5 July 2026. Submit it by 7 August 2026. The final Self Assessment return you submit in the old-style format will be for the tax year ending 5 April 2026. The year you start using MTD will begin on 6 April 2026.

Your Final Declaration replaces the old Self Assessment tax return. You submit it through your software by 31 January following the end of the tax year. The Final Declaration includes any other income sources you have — pensions, dividends, savings income, and your share of profit from any partnership — in addition to the totals already submitted in your quarterly updates.

Source: GOV.UK, "Sign up for Making Tax Digital for Income Tax" (last updated 24 August 2026)

Step 5 — Verify your IT setup

A software change is straightforward. The IT changes that go with it are where many small businesses stumble.

If your team shares a Microsoft 365 environment — Outlook, OneDrive, SharePoint, Teams — consider the following points before MTD goes live:

• Software access: Ensure the person responsible for MTD submissions has an active licence for the chosen MTD-compatible software and that it can connect to your business bank account if you use that feature.

• File storage: If you rely on spreadsheets stored on OneDrive or SharePoint, verify that the software you choose can read and update those files without permission errors. Shared drives sometimes block API access.

• Role separation: Make sure the person entering records is not the only person with admin rights to your Microsoft 365 tenant. If a single compromised account locks out access to your financial data, your MTD compliance is disrupted.

• Backup and recovery: MTD-compatible software does not replace a proper data backup strategy. If your primary platform is Microsoft 365, an independent backup held outside the tenant protects against tenant-wide compromise. See our managed IT services for more on how we approach this for small businesses.

These are not MTD requirements. They are IT considerations that affect whether your software setup actually works when a quarterly deadline approaches.

Source: NCSC guidance on small business cyber security

Step 6 — Plan the software migration

If you are moving from one tool to another, or adding bridging software to your existing stack, test the migration before 6 April.

• Import a sample year's worth of income and expense data into your chosen software.

• Run a trial quarterly update (do not submit it) to confirm the data flows correctly.

• Check that bridging software creates a valid digital link between your spreadsheet and HMRC.

• Confirm your software can generate the Final Declaration with all required income sources.

Give yourself at least six to eight weeks between software selection and 6 April. That gives you time to import data, train whoever is responsible for submissions, and sort out any bugs.

What happens after MTD goes live?

MTD does not make you compliant with every other regulatory requirement. Digital recordkeeping under MTD is separate from Cyber Essentials certification, separate from GDPR obligations, and separate from your broader IT security posture.

Many of the small businesses we advise are juggling MTD alongside an upcoming Cyber Essentials deadline. The two programmes do not overlap technically — but they do draw on the same people, the same files, and the same IT environment. Getting MTD software working is the quick win. Maintaining your Security IT Baseline across devices, permissions, and backups is the work that prevents problems later.

If you want to understand what gaps exist between your current setup and a defensible standard, book a Security Triage Call. We review your environment against the baseline requirements and give you a clear picture of what needs to be in place.

FAQ

Do I still need to submit a Self Assessment tax return when MTD starts?

Yes. You will submit one final Self Assessment tax return for the tax year before you start using MTD. From 6 April 2026 onwards, your Final Declaration replaces the annual return — you submit it through your MTD-compatible software by 31 January following the end of the tax year.

Can I use Excel spreadsheets for MTD?

You can, but not on their own. If you keep records in spreadsheets, you need bridging software that creates a digital link between the spreadsheet and HMRC. The bridging tool sends your quarterly updates and Final Declaration on your behalf.

What if my qualifying income drops below £50,000 next year?

HMRC will review your Self Assessment tax return each year to check your qualifying income. If your income falls below the threshold for the relevant tax year, HMRC will write to confirm that you no longer need to use MTD. Your software provider can cancel your subscription at that point.

Can I use different software for my business income and my property income?

Yes. HMRC allows you to use different products for different income sources — for example, one package for your self-employment and a different tool for your property income. You can also use one product for quarterly updates and another for your Final Declaration. The key requirement is that each product must be HMRC-recognised for the task it performs.

Is MTD for Income Tax already live?

Yes. HMRC confirmed that MTD for Income Tax started for businesses with qualifying income over £50,000 from 6 April 2026, following the Autumn Budget 2024 announcement and the Spring Statement 2025.