Self-employed taxpayers and landlords have one last chance to trial the government’s Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) initiative before it becomes mandatory for some categories of earners in 2026.
HMRC recently broadened the scope of its pilot scheme for the 2025/26 tax year. Running from April, the pilot is open to people who have earned more than £50,000 in the current tax year from either self-employment or property income, but with specified exemptions.
In the latest changes to the pilot, two of those exemptions have now been lifted. Eligible taxpayers liable for the High-Income Child Benefit Charge (HICBC) and those with income from jointly owned properties can now join. The deadline to sign up is April 5th.
Getting ready for MTD
MTD is a government-led initiative designed to modernize the UK tax system by transitioning to digital record-keeping and reporting. It was first introduced in 2019 for VAT. The next major phase of implementation, MTD for ITSA has seen several delays and changes to its criteria ahead of its now-scheduled introduction in April 2026.
Digital reporting for income tax will initially only be mandatory for sole traders and landlords with taxable turnover above £50,000. A year later, from April 2027, the threshold lowers to include those with turnover above £30,000. People earning less than that from self-employment and/or property income will still be able to use the current self-assessment system, although the government has indicated that it will look at lowering the threshold again to £20,000 by the end of the current Parliament.
You can check if and when you will be required to switch to MTD using this tool.
The main requirements for MTD for ITSA are:
- Maintaining digital records of income and expenses.
- Submitting quarterly updates to HMRC using compatible software.
- Completing an End of Period Statement (EOPS) and a final declaration annually.
Compared to self-assessment at present, the new scheme places additional administrative burdens on sole traders and landlords more in line with the tax regime for businesses. It will require more taxpayers to adopt compatible accounting software and switch to quarterly rather than annual reporting.
The pilot for 2025/26 aims to refine the MTD for ITSA system ahead of its mandatory implementation in April 2026. But as well as offering HMRC an opportunity to test out systems, switching early gives taxpayers a similar opportunity to adjust to the new digital processes and ensure a smoother transition.
Participants in the trial can expect more direct support as they gain experience using MTD-compatible software, reducing potential challenges during the full rollout. It is also an opportunity to ensure compliance with the new protocols well in advance, although trial participants need to have a degree of digital readiness (including access to compatible software) in order to take part.
If you are interested in taking part in the trial, we would recommend first consulting with our tax team to assess your current readiness and what the switch before April 5th would entail. Our tax advisers are also available to discuss any aspects of MTD for ITSA with sole traders and landlords looking ahead to switch over in April 2026 or 2027.
Get in touch with us to find out more.
