Making Tax Digital for Income Tax: A Complete Getting Started Guide

Making Tax Digital for Income Tax (MTD for ITSA) is HMRC's biggest change to how sole traders and landlords report their income. Instead of one Self Assessment tax return at the end of the year, you'll keep digital records and send HMRC quarterly updates plus a final declaration — all through compatible software.

If you're a sole trader, this guide walks you through who needs to sign up, when it kicks in, and exactly how to get set up without the headaches.

Who needs to use MTD for Income Tax?

MTD for Income Tax applies to sole traders and landlords whose business or property income is above the thresholds set by HMRC. The rollout is staged:

• From 6 April 2026 — sole traders and landlords with gross income over £50,000 per year.
• From 6 April 2027 — those with gross income over £30,000 per year.
• Below £30,000 — you continue under the current Self Assessment system (for now).

What 'income' means for the threshold

The thresholds are based on your gross business or property income — your turnover before expenses, not your profit. If your turnover crosses the threshold in a tax year, you're brought into MTD from the following tax year.

If you have multiple businesses, HMRC looks at your combined qualifying income. The same goes if you're both a sole trader and a landlord — the income is added together.

What you'll need to do

Once you're in MTD for Income Tax, your obligations change from a single annual return to a steady rhythm through the year:

• Keep digital records of your income and expenses using MTD-compatible software.
• Send a quarterly update to HMRC every three months summarising your figures.
• Submit a final declaration at the end of the tax year to confirm your totals and claim any reliefs.
• Pay your tax as normal through Self Assessment payment dates.

How to get set up in four steps

Getting started is straightforward once you know the sequence. Here's the path most sole traders take:

• Choose HMRC-recognised MTD software — AppyTax is built specifically for sole traders and handles the whole process.
• Create your account and verify your identity.
• Securely connect your HMRC account so the software can send submissions on your behalf.
• Start logging income and expenses digitally — your first quarterly update will be ready when it's due.

What happens to my Self Assessment?

Under MTD for Income Tax, your quarterly updates and final declaration replace the traditional Self Assessment return for your business income. You'll still pay tax under the same Self Assessment payment system, and other income (such as employment income) is still handled the usual way.

The key shift is how you report: little and often, digitally, instead of one big return once a year.

Ready to start?

AppyTax guides you through every step — from connecting HMRC to filing your first quarterly update. Subscribe and you'll be set up in minutes.