Making Tax Digital for Income Tax Self Assessment (MTD ITSA) will become mandatory from April 2026 for certain UK taxpayers, including landlords and sole traders. This mandate introduces new digital requirements aimed at improving the accuracy and timeliness of tax reporting.

Understanding the Thresholds for MTD ITSA Mandation

The key threshold for the April 2026 mandation under MTD ITSA is set at £50,000 of income. Specifically, taxpayers with total income exceeding £50,000 in a tax year must comply with the MTD ITSA digital reporting rules from April 2026 onwards. This threshold directly impacts landlords and sole traders whose rental or business income surpasses this limit.

The Role of January 31st Tax Returns

The determination of who falls into the mandation category is based on the information submitted by the January 31st tax return preceding the April 2026 start date. HM Revenue & Customs (HMRC) will assess the reported income on these returns to establish which landlords and sole traders meet or exceed the £50,000 threshold and are therefore required to comply with MTD ITSA requirements.

This objective measure helps provide clarity and certainty for taxpayers, allowing those above the threshold to prepare adequately for the transition to fully digital tax reporting and submission.

Implications for Landlords and Sole Traders

For landlords and sole traders exceeding the income threshold, this means they must use HMRC-recognised software to maintain digital records and submit Income Tax Self Assessment updates digitally. Traditional paper-based submissions or manual calculations will no longer meet compliance standards.

Landlords should review their rental income and sole traders their business income from the relevant tax year captured in the January 31st return to verify their status under MTD ITSA rules. Early preparation and consultation with tax professionals or software providers can help ensure a smooth transition to mandated digital filing.