Making Tax Digital for income tax self assessment (MTD for ITSA) becomes mandatory from 6 April 2026, and while it doesn’t apply to limited company profits, many will still be affected in their personal tax affairs.
If you receive rental income or receive income from self-employment this is one change you shouldn’t ignore. Below, we break down what MTD for ITSA is, who it applies to, and why it still matters to you.
What is MTD for ITSA?
It's HMRC’s new way of collecting and monitoring income tax information from individuals with self-employment and/or property income.
Instead of keeping paper records and filing one annual self assessment tax return, affected taxpayers will need to:
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keep digital records of income and expenses;
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submit quarterly summary updates to HMRC using compatible software;
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complete end-of-year adjustments and a final declaration digitally.
It’s important to note that quarterly updates are not full tax returns. They’re summaries pulled directly from your bookkeeping software, with your final tax position still confirmed at year end.
Does MTD for ITSA apply to profits from a limited company?
MTD for ITSA does not apply to limited company profits. Corporation tax, payroll, and dividend reporting remain outside the scope of this change for now.
However, many limited company business owners and contractors will still fall within MTD for ITSA because of personal income outside their company, including:
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rental income from buy-to-let or holiday properties;
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sole trader or freelance income alongside contracting;
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overseas property income taxed through income tax.
If you have any self-employment or property income, it’s your combined gross total income (not profits) that determines whether you must join MTD for ITSA.
Who must join MTD for ITSA and when?
HMRC has confirmed a phased rollout based on qualifying income. This means total gross income from self-employment and property, before expenses or tax.
The current timetable is
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From 6 April 2026 - qualifying income over £50,000 (based on the 2024/25 tax return).
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From 6 April 2027 - qualifying income over £30,000.
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From 6 April 2028 - qualifying income over £20,000.
Employment income, dividends, pensions, and savings interest do not count towards these thresholds.
Once you’re in MTD for ITSA, current guidance suggests you’re likely to remain in the system, even if your income later drops below the threshold.
What changes in practice?
If you’re affected, MTD for ITSA will change how you manage your personal tax reporting.
You’ll need to:
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keep digital records using HMRC-recognised software;
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submit four quarterly updates each tax year;
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complete an end-of-period statement for adjustments;
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file a final declaration by 31 January, replacing the traditional self assessment return.
You’ll still be responsible for paying income tax and national insurance under the existing rules, including payments on account where applicable.
Key dates contractors should be aware of
For those joining in April 2026, the timeline looks like this:
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31 January 2026 - deadline to file your 2024/25 self assessment return as normal.
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6 April 2026 – MTD for ITSA begins for qualifying individuals.
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7 August 2026 - first quarterly update deadline.
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7 November 2026, 7 February 2027, 7 May 2027 - remaining quarterly updates for the 2026/27 tax year.
You’ll still submit a traditional self assessment return for 2025/26, even if MTD has already started.
What changed in the Autumn Budget 2025?
The Autumn Budget confirmed that MTD for ITSA will go ahead in April 2026, but with some transitional support:
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a 12-month soft landing where late quarterly updates won’t attract penalty points;
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an extra 15 days before late payment penalties apply in your first year;
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continued deferrals for certain specialist cases, such as trust income and averaging.
These changes are designed to ease the transition, not delay it.
Six practical steps to take now
If your personal income is close to, or above, the thresholds, the rest of the 2025/26 tax year is your preparation window.
Key steps include:
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checking whether your combined income puts you in scope;
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reviewing how you currently keep records;
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moving away from spreadsheets or paper if needed;
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choosing MTD-compatible software early;
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planning for more regular tax visibility and cashflow management;
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considering voluntary early sign-up to test the process.
Starting with clean, accurate data will make quarterly reporting far less stressful.
How we can help
Even if your main business or contracting income sits safely inside a limited company, MTD for ITSA may still affect you personally. Understanding where you stand now helps avoid surprises later.
If you’re unsure whether MTD for ITSA applies to you, or how it fits alongside your limited company affairs, we’re here to help. If you’re an existing PayStream client get in touch with your dedicated accounts team, or if you're looking to join PayStream contact one our experienced new business team on 0161 923 0201 for more information.
