MTD ITSA

Making Tax Digital for Income Tax – what it means for you and how we can help

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From April 2026, many self-employed individuals and landlords will need to follow new digital reporting rules. We’ll guide you through everything, set up the right software, and handle your quarterly submissions – keeping you compliant with HMRC.

What is Making Tax Digital for Income Tax?

Making Tax Digital (MTD) is a government initiative designed to move tax reporting online. Under MTD for Income Tax Self Assessment (MTD ITSA), affected taxpayers will record income and expenses digitally and submit quarterly updates to HMRC using approved software. This aims to give HMRC more frequent, accurate information.

You may need to follow the MTD for Income Tax rules if you:

  • Are self-employed
  • Receive rental income as an individual (not through a limited company)
  • Have combined income from self-employment and/or property above the relevant HMRC thresholds

This includes individuals with one or multiple sources of income, as HMRC looks at your total qualifying income, not each activity separately.

If you’re unsure whether this applies to you, we’ll check your position and explain what – if anything – you need to do. The exact income thresholds and start dates are explained in the next section.

When is MTD for Income Tax happening and who will be affected?

HMRC is introducing MTD for Income Tax in phases. The rollout begins in April 2026, starting with those on higher incomes before expanding to more taxpayers the following year.

Phase 1 – from April 2026

MTD for Income Tax becomes mandatory for individuals with:

Total qualifying income over £50,000 -From self-employment and/or property

Phase 2 – from April 2027

MTD expands to individuals with:

Total qualifying income over £30,000

All the same reporting rules apply.

Phase 3 – from April 2028

Planned expansion to individuals with:

Total qualifying income over £20,000

This brings most smaller sole traders and landlords into MTD, even if they are currently exempt.

Who is not included (yet)?

  • Partnerships – HMRC has confirmed they will not be required to join in 2026 or 2027.
  • Individuals with qualifying income under £20,000 – currently excluded; HMRC will review this group in future.
  • Limited companies are not included in this phase.

If you’re unsure and you’re an SG Accounting client, we can quickly confirm whether the new rules apply to you.

What will you need to do under MTD?

You will be required to:

  • Keep digital records of your income and expenses
  • Submit quarterly updates to HMRC
  • Make an end of year submission
  • Complete a Final Declaration

It’s a significant shift – but with the right support and software, it can be straightforward.

How SG Accounting supports you with MTD ITSA

We’re already MTD-ready, working closely with software partner FreeAgent. Our MTD service takes the pressure off you and ensures smooth, accurate submissions every time.

Our MTD Service Includes:

  • Registration for MTD with HMRC
  • Software setup and configuration on FreeAgent
  • Guidance on keeping compliant digital records
  • Quarterly reviews and submission to HMRC
  • Support with your Final Declaration
  • Ongoing access to your SG accountant for advice

Pricing for MTD ITSA

To keep MTD simple and affordable, our service is charged per quarterly submission, with a one-off setup fee in your first year. This is in addition to our standard Sole Trader/Tax Return fees.

Initial setup: £95 + VAT (one-off)

This includes:

  • Registering you for MTD with HMRC
  • Setting up your MTD connection in FreeAgent
  • Reviewing and configuring your digital record structure
  • Providing initial MTD guidance and onboarding support

Quarterly submission: £75 + VAT per submission

This includes:

  • Review of your digital records for the quarter
  • Preparation and submission of your MTD update to HMRC
  • Support for categorising transactions and resolving queries
  • Ensuring each submission is accurate and compliant

Example annual cost

Setup (year one only): £95 + VAT

Quarterly submissions: 4 × £75 = £300 + VAT

Total in year one: £395 + VAT

Total in following years: £300 + VAT

Transparent pricing. Pay only for the submissions you need. Please note that these fees are in addition to our standard Sole Trader/Tax Return fees.

Why start preparing early?

Even though mandatory MTD reporting doesn’t begin until 2026, preparing early simply means making sure your software, records and processes are ready ahead of time – not necessarily opting into MTD before you have to.

Getting set up early means:

  • Avoiding last-minute stress when MTD goes live
  • Ensuring your software and bank feeds are working smoothly
  • Building good digital recordkeeping habits now
  • Reducing the risk of errors once quarterly reporting starts
  • Making the transition easier for both you and your accountant

You don’t need to start submitting quarterly returns early, but you will benefit from having everything in place well before your mandatory start date.

We recommend clients who must join MTD in 2026 or 2027 begin their setup asap, so everything is running smoothly before the first quarterly update is due. The only fee payable for doing this would be the set-up fee of £95.

FAQs

Yes, you will still need to complete a tax return by the 31st January each year.

If you already FreeAgent, you’re in great shape. If not, we’ll help you get set up. You’ll need separate accounts for property and sole trade income if you have both – again, all part of the service.

No – MTD doesn’t change tax rules, allowances, or rates. It only changes how you report your income and expenses. You may feel more organised because your records are updated quarterly, but your tax bill is still calculated in the same way.

You will be required to:

  • Keep digital records of your income and expenses
  • Submit quarterly updates to HMRC
  • File an end of year submission
  • Complete a Final Declaration

Yes. Our MTD service covers everything from setup to quarterly updates and year-end workflows.

No. You still pay tax once or twice a year, just as you do now.

The quarterly updates are for reporting only – they don’t trigger tax payments.

HMRC defines qualifying income as the total of:

  • Self-employment income (sole trader)
  • Rental income (property)

It is calculated before expenses, and income from separate businesses or multiple properties is added together.

If your income rises above a threshold, you may enter MTD from the next tax year.

If your income falls below a threshold, you may become exempt – but the rules are complex, and HMRC requires evidence.

SG will monitor this for you and advise when you need to join or can safely exit.

Only if they connect to bridging software compatible with MTD — but this is more work and often unreliable.

Because most SG clients already use FreeAgent, we strongly recommend continuing or migrating to FreeAgent for a seamless experience.

No. MTD connects to you as an individual taxpayer, not each business.

However, each business type (self-employment vs property) requires its own set of quarterly updates – and we handle this for you.

Yes, you still need to keep evidence of business expenses – but digital copies are fine.

FreeAgent has a mobile app where you can photograph receipts and upload them instantly.

HMRC will introduce a points-based penalty system.

Repeated missed submissions could trigger financial penalties.

SG’s quarterly submission service is designed to prevent this – we’ll keep you on track and handle deadlines for you.

No. Rental income is grouped together for quarterly updates.

We will advise you clearly on how to report each type.

Yes, voluntary early sign-up is technically possible – but HMRC’s pilot programme has limitations and may not accept everyone yet.

We can help you decide whether early adoption would benefit you.

Yes. Under MTD, the end of year submission replaces some parts of your year-end work, but you still need year-end adjustments and a Final Declaration.

We will manage all of this as part of your service.

No. MTD for VAT began earlier and applies to VAT-registered businesses.

MTD for Income Tax is a separate system – even if you already comply with MTD for VAT, you must still join MTD ITSA when applicable.

No. HMRC only receives the information you submit through your MTD software – they do not get direct access to your banking or bookkeeping systems.

Yes, with your permission.

FreeAgent allows your accountant to log in, check transactions, correct issues, and prepare your quarterly submissions.

Typically:

  • Make sure you’re on FreeAgent
  • Connect bank feeds
  • Keep your bookkeeping up to date
  • Confirm your qualifying income
  • Allow SG to register you for MTD

We’ll walk you through everything – most clients only need to spend a few minutes on setup.

Ready to get MTD-ready? We’re here to make it simple.

Whether you’re an existing SG client or looking for an accountant who can manage MTD for you, our team is ready to help.

Existing clients Get started with MTD support

If you have further questions or are ready to get started either:

Contact your Client Director

Call: 01962 896968

Email:
enquiries@sg-accounting.co.uk

New to SG Accounting?
Get in touch for more info

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