What is Making Tax Digital for Income Tax?
Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is a UK government programme that changes how landlords and sole traders report their income to HMRC. Instead of a single annual Self Assessment return, you will submit quarterly digital updates — four times a year — using HMRC-recognised software.
MTD is not optional. It is a legal requirement for those above the income thresholds. Non-compliance carries financial penalties.
Who does MTD ITSA affect?
MTD ITSA applies to UK landlords and sole traders whose gross income (before expenses) exceeds the relevant threshold. Income from property and self-employment is counted together to determine your threshold.
| Wave | Who | Threshold | Start Date | Est. Affected |
|---|---|---|---|---|
| Wave 1 | Landlords & sole traders | Income > £50,000 | 6 April 2026 | ~300,000 |
| Wave 2 | Landlords & sole traders | Income > £30,000 | 6 April 2027 | ~970,000 |
| Wave 3 | Landlords & sole traders | Income > £20,000 | 6 April 2028 | ~975,000 |
How do quarterly submissions work?
Each quarter, you must submit a summary of your rental income and allowable expenses to HMRC. The tax year runs from 6 April to 5 April, divided into four quarters:
- Q1: 6 April – 5 July → deadline 7 August
- Q2: 6 July – 5 October → deadline 7 November
- Q3: 6 October – 5 January → deadline 7 February
- Q4: 6 January – 5 April → deadline 7 May
After the fourth quarter, you also submit an End of Period Statement (EOPS) and a Final Declaration to crystallise your tax liability — this replaces the old Self Assessment return.
What counts as HMRC-compliant MTD software?
HMRC-compliant MTD software must connect directly to the HMRC MTD ITSA API. Spreadsheets, PDF tools, and manual entry into the HMRC portal do not qualify. Software must appear on HMRC's list of recognised MTD software providers.
LandlordSorted is recognised HMRC MTD software. We connect directly to the HMRC MTD ITSA API.
Penalties for non-compliance
HMRC uses a points-based penalty system for MTD late or missing submissions:
- Each missed deadline earns 1 penalty point
- Reaching the points threshold triggers a £200 fixed penalty
- Further penalties apply for continued non-compliance
- Points expire after 24 months of compliant submissions
Late payment of tax due also incurs interest and surcharges, separate from the points system.
What expenses can landlords deduct?
Allowable expenses reduce your taxable rental profit. The main categories are:
- Letting agent fees
- Repairs and maintenance (revenue expenditure only — not improvements)
- Mortgage interest — subject to 20% basic rate tax credit (not a full deduction)
- Buildings and contents insurance
- Ground rent and service charges
- Accountancy and legal fees
- Council tax and utilities (if paid by landlord)
- Cleaning, gardening
- Replacing existing furnishings (domestic items replacement relief)
How LandlordSorted helps
LandlordSorted handles every part of MTD compliance for residential landlords: