What MTD ITSA actually is
Making Tax Digital for Income Tax (MTD ITSA) is the new way HMRC wants self-employed people and landlords to file their tax. Instead of one big Self Assessment return at the end of the year, you send four quarterly updates from MTD-compatible software, plus a Final Declaration after the tax year ends.
The rules have moved more than once. The current position, as set by HMRC, is the one we use throughout this page.
Who has to comply, and when
MTD ITSA phases in by income band. The threshold is based on qualifying income, meaning gross self-employment plus gross UK property income, before any expenses.
| From | Qualifying income threshold | Who's in |
|---|---|---|
| 6 April 2026 | Over £50,000 | Sole traders and landlords |
| 6 April 2027 | Over £30,000 | Sole traders and landlords |
| 6 April 2028 | Over £20,000 | Sole traders and landlords |
Limited companies are not in MTD ITSA. MTD for Corporation Tax is a separate, later rollout. Partnerships are also not in yet.
What to do, in order
If you're reading this and want a short checklist to act on, here it is. Five steps. Most tradespeople can be set up in an afternoon.
- 1.Check if you're in. Look at last year's Self Assessment return. Gross self-employment plus gross UK property income over £50,000? You're in from 6 April 2026. Between £30k and £50k? You're in from 6 April 2027. Between £20k and £30k? 6 April 2028.
- 2.Pick MTD-compatible software. Xero, QuickBooks, FreeAgent and Sage are the common choices. Most tradespeople pick Xero or QuickBooks because every UK accountant supports them.
- 3.Decide who files. Your accountant can file on your behalf, or you can file yourself from the software. Either way you need digital records in place by the start of your first quarter.
- 4.Sort the day-to-day capture. Every job, quote, invoice and expense has to land in your software with a date, amount and category. This is the part most people dread. Graft does it for you over WhatsApp.
- 5.Diarise the deadlines. 7 August, 7 November, 7 February, 7 May. Plus the Final Declaration by 31 January after the tax year. Missing a quarterly update normally earns a penalty point, though the first year (2026/27) has a soft landing, covered below.
What "digital records" means in practice
For each piece of business income and expense, HMRC wants a digital record in MTD-compatible software (or a spreadsheet plus bridging software). Each transaction needs:
- The date
- The amount (in sterling)
- The category (income, materials, fuel, subcontractor, etc.)
Paper receipts are still allowed as backup. You don't have to scan every receipt. What changes is the books themselves. A handwritten notebook of jobs and a stack of paper invoices is no longer enough on its own.
The quarterly deadlines
By default MTD uses tax-aligned quarters ending 5 July, 5 October, 5 January and 5 April. The submission deadline is the 7th of the following month.
| Quarter | Period ends | Submission due |
|---|---|---|
| Q1 | 5 July | 7 August |
| Q2 | 5 October | 7 November |
| Q3 | 5 January | 7 February |
| Q4 | 5 April | 7 May |
You can elect to use calendar quarters (ending 30 June, 30 September, 31 December, 31 March) instead. Either way the submission deadlines stay the same. The Final Declaration replaces your Self Assessment and is due by 31 January after the tax year ends.
One bit of breathing room for year one: HMRC has confirmed a soft landing for 2026/27, so you will not get penalty points for filing a quarterly update late during that first year. It does not extend to the Final Declaration, which is penalised as normal. Treat the soft landing as time to get your system working, not a reason to ignore the quarters.
What it costs you
The numbers depend on your setup, but for a typical UK tradesperson with one business and an existing accountant, expect roughly:
| Cost | Typical range | Notes |
|---|---|---|
| MTD-compatible software | £10–30 / month | Xero, QuickBooks, FreeAgent, Sage. Plans for sole traders. |
| Accountant uplift | £0–300 / year extra | Some accountants absorb it, others add a quarterly filing fee. Ask yours. |
| Your time | An hour a week, or less | When capture is automated, which is what Graft does over WhatsApp. More if you key in receipts by hand. |
The cost most tradespeople miss is the unpaid Sunday-evening admin. MTD makes it cheaper to stay on top of, more expensive to ignore. Graft is built to take that capture off your plate, so the hour a week stays an hour and the quarterly numbers are ready to file.
Multiple businesses, and exemptions
More than one business? You file quarterly updates per business. A sole trader running a trade plus a rental property is treated as two businesses for MTD purposes. That's 8 quarterly updates per year (4 per business) plus one Final Declaration. Most accounting software handles it in one place but the submissions are separate.
Exemptions exist, but they're narrow. HMRC can grant a digital exclusion exemption on grounds of age, disability, location (no reliable internet), or religion. You have to apply, and most self-employed tradespeople won't qualify. If you think you do, the application is on gov.uk.
What "MTD-compatible software" means
It's software HMRC has approved to keep your digital records and file MTD submissions through its API. Xero and QuickBooks are the names most UK tradespeople and their accountants reach for, with FreeAgent and Sage also on the approved list.
There are also bridging tools that let you submit from a spreadsheet. HMRC publishes the full list of approved software on gov.uk.
How Graft handles MTD for you
Graft runs on WhatsApp through Reg, the AI assistant that does your admin. You voice note your jobs, quotes, invoices and expenses to Reg as you work, and he turns each one into a dated, categorised entry in Xero or QuickBooks, ready for you or your accountant to confirm.
Because Xero and QuickBooks are MTD-compatible, your digital records build up in real time instead of in a Sunday-night scramble. When the quarter ends, the numbers are already there. You (or your accountant) check them and submit the update from Xero or QuickBooks in a couple of clicks. No shoebox-of-receipts rebuild.
FAQ
Do all self-employed tradespeople have to use Making Tax Digital?
No. MTD for Income Tax phases in by income band. From 6 April 2026 it applies to sole traders and landlords with qualifying income over £50,000. From 6 April 2027 the threshold drops to £30,000, and from 6 April 2028 it drops to £20,000. Qualifying income is your gross self-employment plus property income, not your profit. If you're under £20,000 you stay on the current Self Assessment system.
What counts as 'qualifying income' for MTD?
Gross turnover from self-employment plus gross rental income from UK property, before any expenses. HMRC looks at the totals on your last Self Assessment return to decide whether you're in. If you're trading through a limited company the rules are different and MTD ITSA does not apply (MTD for Corporation Tax is a separate, later rollout).
Do I have to scan every paper receipt?
No. The digital record HMRC wants is the transaction (date, amount, category) inside your MTD-compatible software. Receipts can stay on paper as backup. Most tradespeople either snap a photo into Xero/QuickBooks for their own records, or keep a receipts envelope per month. Neither is mandated by MTD itself.
What if I have more than one business?
You file quarterly updates per business. A sole trader with one trade plus a rental property is treated as two businesses for MTD, so that's 8 quarterly updates per year plus 1 Final Declaration. Most accounting software handles this in one place, but the submissions are separate.
Are there exemptions from MTD?
Yes, narrow ones. HMRC can grant exemptions for digital exclusion, including age, disability, religious grounds, or being in a location without reliable internet. You have to apply. Most self-employed tradespeople won't qualify.
How many submissions do I have to make a year?
Five for most sole traders with one business. Four quarterly updates during the year (cumulative totals of income and expenses), then one Final Declaration after the tax year ends. The Final Declaration replaces the current Self Assessment return.
When are the MTD quarterly deadlines?
Using the standard quarters that end 5 July, 5 October, 5 January and 5 April, the submission deadlines are 7 August, 7 November, 7 February and 7 May. You can elect to use calendar quarters (ending 30 June, 30 September, 31 December and 31 March) instead. The deadlines stay the same either way (7 August, 7 November, 7 February, 7 May); only the period end dates change.
What is MTD-compatible software?
Software that HMRC has approved for keeping digital records and submitting MTD updates through its API. Xero, QuickBooks, FreeAgent and Sage are on the list. Bridging software lets you submit from a spreadsheet, but you still need the digital records kept in a structured way. The HMRC list of approved software is on gov.uk.
Will I get fined if I miss a quarterly update?
Eventually yes, but not in the first year. MTD ITSA uses a points-based late submission system: you get a point for each missed submission, and once you reach four points (the quarterly threshold) a £200 penalty applies. The exception that matters right now is that HMRC has confirmed a soft landing for 2026/27, so no penalty points are issued for late quarterly updates during that first year. The soft landing does not cover your Final Declaration, which is due by 31 January and is penalised under the normal rules from the start. Late payment of tax is separate again, with its own interest and penalties.
How does Graft fit in?
Graft runs on WhatsApp through Reg, its AI assistant. You message Reg about your jobs, quotes, invoices and expenses, and he turns them into dated, categorised entries in Xero or QuickBooks. Because Xero and QuickBooks are MTD-compatible, your digital records build up as you work, ready for you or your accountant to check. When the quarter ends, you (or your accountant) file the update from Xero or QuickBooks in a couple of clicks.
What if I have an accountant?
Most accountants will file the quarterly updates and Final Declaration on your behalf, the same way they file your Self Assessment now. They need access to your MTD-compatible software. Graft pushes everything into Xero or QuickBooks so your accountant has live, up-to-date numbers without chasing you for a shoebox of receipts.
Can I keep using a spreadsheet?
Yes, but with bridging software. The spreadsheet has to be the digital record (every transaction in a row, dated and categorised) and the bridging software submits the totals to HMRC. Most tradespeople find this fiddlier than just using Xero or QuickBooks with Graft.
Sources
- HMRC: Making Tax Digital for Income Tax
- HMRC: Check when to sign up for MTD for Income Tax
- HMRC: Find software compatible with MTD for Income Tax
This page is general guidance, not tax advice. If you're unsure how MTD affects your specific situation, ask your accountant. We keep this page updated as HMRC's guidance changes.
Related guides
Trade-specific pages with example quotes and pricing defaults.