Making Tax Digital for ITSA 2026: The 90-day readiness checklist

April 6th is just around the corner, which means it’s time for the first wave of eligible landlords and sole traders to move off the old-fashioned tax system, and onto Making Tax Digital for Income Tax Self Assessment (MTD for ITSA). That might sound scarily soon, but don’t panic, as you still have time to get prepared prior to the deadline.

Unlike bigger businesses, sole traders and landlords don’t have teams to support them, so it’s understandable you might be feeling unsure about what you need to do to keep HMRC happy. That’s why we built our checklist to help you get ready before the deadline hits.

We’ll take you through each step of the process, explaining what you need to know, and what you need to do. We’ll cover who’s eligible for the scheme, what the key dates are, and why it’s beneficial to use the best accounting software to be MTD-ready. Now let’s start the countdown, and get you fully MTD-ready in just 90 days.

Making Tax Digital: quick overview

Making Tax Digital (MTD) is a government scheme introduced by HMRC to make the recording and paying of taxes more modern by moving to a fully digital system. MTD was first introduced solely for VAT, and has been devised to move away from a single end-of-year tax return and towards a more fluid system.

Ultimately this is all beneficial, as it’s designed to give businesses a real-time view of their finances and make recording and paying taxes easier and more efficient.

MTD for VAT was introduced in April 2022, and now all VAT-registered businesses will be automatically enrolled (the threshold for VAT registration for UK businesses is currently £90,000).

The next stage of MTD, MTD for Income Tax Self Assessment, is set to become mandatory on April 6th 2026 for all sole traders and landlords whose turnover exceeds £50,000 per year.

This will drop to £30,000 in 2027, and then £20,000 in 2028.

Making Tax Digital checklist: how to get ready

If you’re a sole trader or landlord whose turnover for the tax year 2025/2024 exceeds £50,000 per year, but you’re still unclear what you need to do, don’t stress.

We’ve compiled a clear, comprehensive, and easy-to-follow checklist that will take you through all the tasks you need to complete to get ready. If you want to stay on HMRC’s good side, just follow along with the steps we’ve listed below:

Step 1: preparation and setup (countdown: days 90 to 60)

Fail to prepare and prepare to fail. It’s a cliche but it’s accurate, and the first step is make sure you know what your responsibilities are, and that you have the right software in place.

Check your eligibility

Before anything else, you’ll need to check that you qualify for MTD for Income Tax. Just to refresh your memory this applies to the self-employed and landlords whose turnover crosses the threshold of £50,000. To be clear: this is for the tax year 2024/2025. So if you’re unsure, check your 24/25 tax return to see if MTD for ITSA applies to you.

The threshold will then drop each year on April 6th:

• 6 April 2027: self-employed and landlords who are earning between £30,000 and £50,000 annually.
• 6 April 2028: the rules above will kick in for the self-employed and landlords who are earning over £20,000.

Audit your workflow: how do you keep your accounts?

Once you’ve confirmed that you’ll be inducted into MTD this year, your next step should be a full audit of your current bookkeeping workflow.

Your workflow will be moving from annually, to quarterly. So you should analyse what your current bookkeeping method is, as you may need to adjust the frequency of your updates.

You will also need to consider how you are currently keeping your records. Are you using spreadsheets or an outdated piece of accounting software to keep your accounts? If so, it’s time to make the switch to HMRC-approved MTD software, or use ‘bridging software’.

Find the right MTD-ready software

You can find a list of HMRC-approved software using HMRC’s finder tool. Our recommendation is to use full cloud accounting software. It’s efficient, reliable, and will give you access to a host of tools and features that will make your bookkeeping life much easier. The big three in the accounting software space are:

• Xero: one of the most popular options amongst accountants and business owners alike, and has a new ‘Simple’ plan that’s cheap and MTD for Income Tax ready
• QuickBooks: part of the American multinational company Intuit Inc., QuickBooks has a standout mobile app for managing your books on the move (find out about how much QuickBooks costs)
• Sage: a stalwart brand name in the accounting software space, Sage has its own AI-productivity assistant that help you become more efficient (find out more in our Sage pricing guide)

Using a full-accounting software like Sage can make your bookkeeping easier, with a range of customisable templates for invoicing. Source: Startups.co.uk

There are some free options available, such as Zoho Books, which was our number one ranked free accounting software option (though your revenue does need to fall under 35k per year to qualify for the free plan), as well as other free options like Clear Books, or !Coconut Free.

But just keep in mind these free plans can be extremely limiting (such as restrictive caps on invoices or no receipt capture tool), so it can be worth paying for more comprehensive software as it will make your tax life less stressful in the long run.

You’ll also need an option that scales along with you. Even if you’re only a landlord now, there’s every chance you might launch a business in the future.

Read next: our full review of QuickBooks

Xero: the new plan specifically built for sole traders and landlords

Xero's Simple plan is its most affordable yet, and has been made for non-VAT registered businesses

Visit Xero 30-day free trial

Open a business bank account

It’s not a legal requirement to have a business bank account, but it’s highly advised you open one, as trying to separate your business and personal expenses from one account will have you tearing your hair out.

For one thing, most HMRC-approved accounting software enable automatic bank feeds. This pulls all your transactions through to the software automatically, which is a huge time saver for the self-employed…unless its pulling through all your personal transactions through as well. Then you’ll need to go through and untangle it all.

Having a dedicated business bank account will make your bookkeeping so much easier and more efficient, and it also means if you ever have to face an HMRC audit, the process will be much smoother as you’ll only be providing a list of business transactions.

Here’s a tip: you can get a completely free software account with FreeAgent by opening a business bank account with any of the following: NatWest, Royal Bank of Scotland, Ulster Bank or Mettle (and make one transaction per month). FreeAgent is a comprehensive accounting software solution that’s MTD-ready, so this is well worth considering, and great value for money.

Step 2: data migration (countdown: days 60-30)

Now you should begin the process of moving all your data from your old system (spreadsheets and antiquated non-HMRC approved accounting software) to your new cloud accounting software. Once you’re setup on the new software these are some important points to action:

Register for MTD ITSA

This a crucial step, unlike MTD for VAT, you will not be automatically enrolled. You need to to register with HMRC: you can do that directly through HMRC’s website. Make sure you sign up well before the April 6th deadline so you’re prepared. Don’t put this off.

There’s some information you’ll need to prepare ahead of time to be ready for the process:

• The same user ID and password you got when you first signed up for Self Assessment
• Either your business start date or the date you started receiving property income (within the last two tax years)
• Confirmation of the tax year you will begin using MTD for ITSA
• You business name (sole traders only)
• Your business address (sole traders only)
• The trade of your business (sole traders only)

When you first login, HMRC may ask you to provide further proof of your identity. You can do this via a mobile app by taking a photo of yourself, or by answering questions that HMRC has on record about you (drivers license or passport for example).

Categorise your expenses

Within the guidelines of MTD for ITSA, your expenses must be categorised in line with HMRC-specified categories. These are, for the most part, comparable to the same ones you’ll be using for the Self Assessment tax return: SA103F and SA105.

Begin keeping digital records 

This is really the core principal of MTD for ITSA, and a legal requirement, so you will need to make sure a digital record of all your business and property income and expenses is created, and kept in your HMRC-approved software. 

Once you have selected your chosen MTD-ready software, you will need to begin moving across your bookkeeping data from the spreadsheet (Excel or Google Sheets) to your cloud accounting software. You’ll need to check the compatibility of your chosen software before you start (some will only be able to receive CSV files for example).

To do this, you need to:

1. Prepare and organise your spreadsheet data into a clean, clear table format: e.g. columns for the date, description, amount, and account.
2. Backup your data and make a copy before the import, in case anything goes wrong during the process.
3. Search your accounting software for the dedicated import tool.
4. During the import, you’ll need to map your spreadsheet columns to the correct data fields in your new accounting software (to make sure everything winds up where it should).
5. You can now finalise the import (most software will provide a preview before you pull the trigger, so you can check it’s all been pulled through correctly).
6. Before importing, you should check the data for any errors by comparing it to your bank statements.
7. If there are any errors or missing fields, you may need to adjust your spreadsheet and re-import the data.

Once your data is imported and you’re up and running, make sure to keep good digital hygiene like: regular bank reconciliation (monthly) and using a data-capture app to automatically snap and upload receipts and expenses into your system.

Ensure you understand the digital links rule

This is a key tenet of MTD for ITSA, and it relates to the way data is transferred during the process. Digital links automatically transfer data between different programs, applications, or products. This ensures greater accuracy, as it eliminates the need to type anything out manually, and it provides a clear audit trail of the data’s journey.

Once you’ve entered any data into the software you use, any further modification or transfer of that data has to be done by an acceptable digital link. That means no copy and pasting, or cutting and pasting, those actions are not deemed acceptable digital links by HMRC. Every piece of software in the journey needs to be digitally linked to together, like a chain.

For example, you won’t be allowed to write down invoice details in a physical ledger, then use the information to manually update a separate part of your software system. All data needs to move digitally. The following are all examples of digital links that HMRC finds acceptable:

• Linked cells in a spreadsheet
• Moving a set of digital records onto a physical device such as a flash drive or memory stick, which is handed to another person to upload to software
• XML, CSV import and export, and downloading or uploading files
• APL transfer

You can find more information on digital links from gov.uk.

Time for a trial run (countdown: days 30-1)

By this stage, you’ll have your software authenticated and set up, you’ve signed up with HMRC for MTD for ITSA, and you’re keeping digital records: time to make sure everything is working as it should before April 6th hits:

• Set reminders: make sure you’ve got calendar reminders set up before each deadline so you don’t forget. Remember there’s also the final declaration (31st January the year following the tax year you are reporting on).
• Confirm your bank feeds are working: don’t wait until the last minute to connect your business bank account to your software. Connect your bank in plenty of time to ensure it’s pulling through the right data.
• Try running a mock report: some accounting software allows you to run practice reports. Find out if your system allows you to do this, and create a mock report for the first quarterly submission (January to March). Investigate it thoroughly. Does everything look right? Are there any discrepancies?

It seems like a lot, but as long as you follow our checklist, and tick it off as you go, you can’t go too far wrong. But if you’re feeling unsure, you should speak to your accountant for any advice on getting MTD for ITSA ready. If you don’t have one, you can use our guide to finding an accountant.

Key deadlines

In order to avoid fines, penalties, and stress, you need to know all the key dates for MTD for Income Tax, beyond just the April 6th deadline. You can refer to the table below which contains all the critical milestones and what you need to do by when:

Make sure all these dates are in your business calendar, with reminders set up. But the key part to remember: there are four quarterly updates to hit:

• Q1 (April to July): Due 7 August
• Q2 (July to October): Due 7 November
• Q3 (Oct to Jan): Due 7 February
• Q4 (January to April): Due 7 May

Then the final declaration on January 31st.

Must-haves for MTD compliance

You might be feeling a little overwhelmed by this stage, but don’t worry, let’s go over the things you absolutely need before April comes around. Think of this like going to the airport – it’s not the end of the world if you forget to pack a spare pair of shorts, but your passport and plane ticket are essential. Your must-haves for MTD are:

• HMRC-compliant software: you can use ‘bridging software’ to connect spreadsheets and other outdated systems to HMRC but our recommendation is to use MTD-ready cloud accounting software.
• Digital-record keeping: you’re required to keep digital copies of all your business and/or property income and expenses. This is a non-negotiable, so no more records kept in physical journals.
• Quarterly-updates: instead of the Self Assessment tax return, you will need to send tax updates to HMRC every three months, and then an end-of-year digital declaration.

So just remember, as long as you have HMRC-approved software, you’re keeping all records digitally, and you’re submitting your updates to HMRC quarterly, you should be in the clear.

Sage: get started on MTD-ready software absolutely free

With Sage Individual Free, non-VAT registered sole traders can be MTD-compliant for £0

Visit Sage Start for free

Essential need-to-knows

Tax can, unsurprisingly, get quite complex. We’ve gone over the essential points in our checklist but there’s still some important information that could effect you as a taxpayer.

The penalty system

As we’ve mentioned, there’s a new penalty system in place for MTD. It’s a points based system, similar to a driver’s license. You receive penalty points for late submissions, and once you’re reached four points you will be charged a £200 penalty fee.

As we’ve also mentioned though, there is an easement on penalties for the first year of the system. Penalty points will not be issued for late quarterly updates submitted in the 2026/2027 tax year. However, while the point-based late penalties might have been waived for the initial first year, it’s crucial to note, interest on late tax payments is still applicable.

It’s also crucial to remember that points accrued for income tax are different for points accrued for VAT (you could, in theory, get hit with a double-fine).

The joint-property rule

There’s an important rule for landlords who joint-own property to know: if you own a rental property with your partner, it’s only your share of the gross income that counts toward your £50k threshold. So you only need to keep digital records and submit updates about your share of the income of joint-owned property, not the total.

Separate submissions

If you’re both a landlord and a sole trader (let’s say you’re running your own side hustle, but you also receive income from a rental property), you can’t declare all your income on one submission. You need to file two separate quarterly submissions: one for your sole trade and another for the rental business.

Registering in advance

If you’re a sole trader or landlord whose turnover is under £50,000, but you want to get used to the system ahead of time, you can join up early. You can still apply to become part of MTD for ITSA for 2026/2027, and it may be a smart way to get your head around the system while the penalty easement period is in place.

“Am I exempt?” quick-check

It is possible to get an exemption from Making Tax Digital for Income Tax, but only under specific circumstances, such as it not being deemed reasonable for you to use the compatible software and you are ‘digitally excluded’.

There are a number of reasons you might feel digital exclusion applies to you, such as (but not limited to):

• Your age, health issues, or a disability prevents you from using the appropriate technology
• You are a practicing member of a religious society or order who’s beliefs prevent them from using digital communications and keeping digital records
• You can’t access the internet due to geographic location, and cannot find a suitable alternative

You can find more information, and apply to be granted exemption, by contacting HMRC directly.

Just note, before applying, HMRC has made it clear which excuses won’t result in an exemption:

• You’ve previously filed a paper tax return and you’d prefer to keep doing so
• You don’t know how to use accounting software (but you can find out which software is the most beginner friendly in our roundup of the best self-employed accounting software)
• You only have a small number of digital records to keep each year
• It will take time and money for you to switch to MTD for ITSA

HMRC does consider all applications for exemption on a case-by-case basis.

Summary: take the stress out of tax time

This might all seem a bit stressful now, but it’s ultimately a positive step for taxpayers, as it makes paying tax more modern and gives you a real-time look at your financials. There will be a teething period, but the key points to remember are simple: you need HMRC-approved software, you need to keep digital records, and you’ll be sending updates every three months.

You might hit a few speed bumps as you go but by getting into the habit of sending updates quarterly, rather than at one big pressure point in the year, you’ll get to know your financials better, making it easier for you to keep business accounts overall.

Compare deals: find the best accounting software for you

Get quotes from a range of top accounting software platforms, to see which is the best fit your business

Compare Costs It only takes a minute.