Starting MTD ITSA: What It Means and How to Get Ready

If you’re a sole trader or a landlord, you’ve probably heard the phrase MTD ITSA floating around for a while now. For some people it’s been filed under “future problem”. For others, it’s been quietly ignored in the hope it might go away.

Unfortunately (or fortunately, depending on your love of digital admin), it’s very much happening and it’s now less than eight weeks away from becoming mandatory for those with turnover over £50,000.

So this feels like a good moment to explain:

• What MTD ITSA actually is

• Who it applies to

• What you need to do to get registered

• What “quarterly submissions” really mean

• How software like Xero, QuickBooks, FreeAgent and Hammock fits into this

• And why even those under £50k might want to join early

  
  

No scare tactics. No jargon for the sake of it. Just a calm, practical guide to what’s changing and how to get ready.

First things first: what is MTD ITSA?

MTD ITSA stands for Making Tax Digital for Income Tax Self Assessment.

In short, it means:

• You’ll keep your business or rental records digitally

• You’ll submit quarterly updates of income and expenses to HMRC

• You’ll still submit a final annual return (so this doesn’t replace Self Assessment entirely)

• The goal is more up-to-date information and fewer “surprise” tax bills

  
  

Instead of doing everything once a year in a big January rush, the idea is that your numbers are kept more up to date throughout the year.

Who does this apply to (from this year)?

From the first mandatory start date, MTD ITSA applies to:

• Sole traders with turnover over £50,000, and

• Landlords with gross rental income over £50,000

If that’s you, MTD ITSA isn’t optional anymore, you’ll need to be registered and using compatible software.

What about people under £50,000?

If your turnover or rental income is under £50,000, you don’t have to join yet. However, you can join voluntarily and that might be a very sensible move. Why? Because from 2027, the threshold is due to drop to £30,000. That means a lot more people will be brought into MTD ITSA in the next phase.

Joining early can:

• Give you time to get comfortable with the process

• Let you build good habits

• Spread the learning curve over time

• Make the eventual mandatory switch much less stressful

  
  

Think of it as a “practice run” rather than being thrown in at the deep end.

What does “quarterly submissions” actually mean?

This is the bit that sounds scarier than it really is. Every quarter, you’ll send HMRC a summary of your income and expenses from your software. These are not tax returns and not final figures, they’re updates.

You’ll still:

• Make adjustments at year end

• Submit a final declaration

• Finalise your tax position as usual

The quarterly updates are more like progress reports than exams. They help HMRC build a picture of how your year is going, and they help you see your numbers more regularly too.

A simple timeline for starting MTD ITSA

Once you’re in MTD ITSA, the rhythm looks like this:

• Keep records digitally, all the time

• Submit 4 quarterly updates during the year

• After the year end, submit a final declaration

• Pay your tax as normal

  
  

So yes, it’s more touchpoints with HMRC. However, each one is smaller and more manageable than the annual scramble most people are used to.

Getting registered: don’t leave this to the last minute

If you’re in the over-£50k group, you’ll need to:

• Register for MTD ITSA with HMRC

• Make sure you’re using compatible software

• Have your records set up properly in that software

This isn’t something you want to be doing in a rush a week before your first deadline. A bit of breathing space now makes everything calmer later.

Choosing software: Xero, QuickBooks, FreeAgent, Hammock

To comply with MTD ITSA, you must use software that can:

• Keep digital records

• Submit quarterly updates to HMRC

• Maintain the digital link between records and submissions

Some of the most common options include:

• Xero - a great all-rounder for many small businesses

• QuickBooks – popular with sole traders and small companies

• FreeAgent – great for small businesses and contractors especially those with certain banks

• Hammock – particularly well-suited for landlords and property businesses

There’s no single “best” choice for everyone. The right software depends on:

• Whether you’re a sole trader or a landlord (or both)

• How complex your affairs are

• How hands-on you want to be

• What you’re already used to

The important thing is that the software is MTD ITSA compatible and set up properly.

What “getting ready” actually looks like

This doesn’t mean becoming an accountant or living inside your bookkeeping software.

In reality, it means:

• Making sure your income and expenses are recorded regularly

• Using bank feeds where possible

• Keeping things reasonably up to date

• Not leaving everything until the last minute

The goal isn’t perfection. It’s consistency. A few minutes each week or month is much easier than trying to reconstruct a whole year from bank statements and emails.

What if you don’t get it right straight away?

This is a big change, and HMRC knows that. There will be a bedding-in period, and nobody is expecting absolute perfection from day one. The key thing is:

• Being registered

• Using the right software

• Making a genuine effort to comply

Small mistakes are fixable. Not engaging at all is what tends to cause problems.

How we can help

MTD ITSA is a change in how things are done, not just when they’re done and that’s often the hardest part. We can help with:

• Checking whether MTD ITSA applies to you now

• Getting you registered correctly

• Helping you choose suitable software

• Setting things up properly from the start

• Explaining what HMRC actually wants in plain English

• Making sure your quarterly submissions are done correctly and calmly

We’ve also already had a client involved in the MTD ITSA beta, so we’re not coming at this cold. We’ve seen how the process works in real life, how the submissions flow, and what HMRC actually asks for in practice, not just in the guidance notes. That means we can help you move onto MTD ITSA with a bit more confidence, fewer surprises, and a much smoother setup.

Final thoughts

If you’re a sole trader or landlord with income over £50,000, MTD ITSA is no longer a “someday” problem, it’s a very soon reality. If you’re under that threshold, the 2027 change to £30,000 means this is probably on your horizon anyway.

The good news? With the right setup, the right software, and a bit of preparation, this doesn’t have to be painful. It’s just a new way of doing something you already do, keeping records and reporting your numbers but in smaller, more regular steps.

Honestly, future you may quite like not having everything land in January all at once.