How to answer critical questions sole traders have on the MTD ITSA 2026 deadline

It feels as though we’ve been hearing about Making Tax Digital (MTD) for close to a decade now – and that’s because we have. 

First announced by the government in 2015, the scheme to modernise UK tax was intended to launch in 2020. However, implementing a system designed to make things simpler for taxpayers has proven difficult. HMRC’s ever-shifting goalposts have become synonymous with the initiative and deadlines have moved time and time again. 

That said, MTD for VAT was mandated for all VAT-registered businesses in April 2022 and the deadline for MTD for Income Tax Self Assessment (MTD ITSA) now looms on the horizon. 

Ready to start MTD for ITSA? Download our guide to get ahead on the Road to 2026.

What is MTD ITSA?

Self-employed individuals (and landlords) will be required to submit quarterly updates and digital self-assessments from 2026. As an accountant or bookkeeper, it’s important that you and your clients are prepared sooner rather than later. Critically, you need to be prepared to answer client questions and help them on this journey to MTD compliance.

The transition will make tax and expense management more efficient, bringing with it greater automation, better visibility and fewer bookkeeping mistakes. Yet the lack of clarity around implementation and compliance means your clients will likely have lots of questions between now and the April 2026 deadline.

Fear not, though, this post has got you covered. In it we explore the most common queries sole traders will have and provide a full rundown on how to prep them for the big changeover. Plus, we’ll explain how Dext Solo can set your firm and clients up for long-term success, starting today. So let’s get started.

Important MTD ITSA questions sole traders want answered

Before April 2026, you’ll need to discuss MTD ITSA with all of your self-employed clients.

For some, the scheme represents uncharted territory, particularly clients who are less digitally savvy. The lack of clarity around its rollout has added to the confusion. This means you’ll probably have to field lots of similar questions.

Here are some of the most common ones you’re likely to encounter.

When are the MTD ITSA deadlines for the self-employed?

Let’s start with the basics. From April 2026, self-employed individuals with annual business income of more than £50,000 will have to keep digital records and send quarterly updates to HMRC using compatible software.

Those with a total income over £30,000 will have to do this from April 2027.

Does MTD ITSA affect landlords too?

Yes, it does. Though the bulk of your affected clients are likely to be sole traders, landlords with property income above the same thresholds will also be required to keep digital records and send quarterly updates from the same dates.

So, if your landlord client’s total combined income from property and/or self-employment exceeds £50,000, they’ll be eligible from April 2026. If it exceeds £30,000, they'll be eligible from April 2027.

What does it mean to keep financial records digitally?

Self-employed individuals and landlords affected by MTD ITSA will have to use compatible software to keep a digital record of their income and expenses.

If your client is both a landlord and a self-employed business owner, they’ll have to keep separate digital records both for their business and property finances.

How often will affected individuals have to send updates to HMRC?

The short answer is – quarterly.

Affected individuals will need to send a summary of their business income and expenses to HMRC every three months using compatible software.

The submission deadlines will be the same for everyone who falls under MTD ITSA. Each year from 7th April 2026 onwards, these will be:

• 7th August

• 7th November

• 7th February

• 7th May

They will also need to submit a full income self-assessment at the end of the tax year and make any required payments as usual.

How will this affect accounting and bookkeeping fees?

Due to increased workloads, fees will need to increase.

As an accountant, the fundamentals of your job will remain the same. You will still need to make sure your clients are fully compliant, help them make deductions and calculate their final income tax bill.

However, MTD ITSA will increase the amount of bookkeeping work required for self-employed clients.

This will come in the form of increased client communication, quarterly updates, and submission of the final declaration. This is on top of increased admin, setup of software and fielding questions (such as these ones.)

In return, clients will benefit from reduced bookkeeping errors and more up-to-date, accurate tax information to help with business planning.

What are the penalties for non-compliance?

MTD ITSA is government legislation. Following its official rollout, compliance will be mandatory.

HMRC have revealed that “penalties for the late submission of income tax returns, including quarterly updates, will work on a points-based system.” Penalty points will be accrued for each late submission and a financial penalty will be imposed once a points threshold has been met. This means your clients won’t be punished financially for occasional slip-ups.

What additional information do I need to collect?

Your clients will still be required to record their business and property income and expenditure. Under MTD ITSA, the main difference is that income and expenditure reports must be collected quarterly via approved software and submitted to HMRC.

There is no requirement to make accounting adjustments or include allowances or reliefs available against business and property income.

So no additional information is required per se, but income and expenditure data does need to be collected on a more frequent basis via mandated digital means.

How do I manage joint ownership as a landlord?

Where property is jointly-owned by more than one individual, each owner will be required to maintain their own digital records and submit separate quarterly returns to HMRC.

HMRC’s latest guidance update says that, if a taxpayer jointly owns a property and only receives notice of their share of the income after expenses have been deducted, then only the net figure will count towards qualifying income.

What you need to do to prepare your sole traders

Under MTD ITSA, your customers must send summary updates of their business and property income and expenses to HMRC every 3 months. They’ll need to store digital records using MTD-compatible software on a smartphone and/or a computer. In HMRC’s own words, the “updates themselves will require little more than a ‘check and send.’” However, this will still be a major change for lots of people.

Clients accustomed to keeping a big pile of receipts in a shoe box and offloading mountains of paperwork onto their accountant’s desk once a year will be forced to adapt.

You’ll need to provide clear communication regarding what’s expected of them and how to maintain digital records. One of the first steps in this process will be to provide guidance on appropriate software.

Find the right record-keeping solution

Adopting bookkeeping software that ties into your own systems and meets government requirements is a must.

There is no record-keeping software currently available from HMRC, so you’ll need to choose the right one for you and your clients.

Here are the key features to look out for when deciding on an appropriate record-keeping application for sole traders and landlords. These will help to smooth the transition for all relevant customers, whether they already keep digital records or will start for the first time.

Flexible transaction submission and reporting:

Software that automatically captures and codes transactions will enable easy grouping and reporting on business records. This will help your clients make better real-time business decisions.

Easy business expense uploads:

The ability to effortlessly upload receipts and transactions is essential. Whether via mobile or desktop app, the software needs wide-ranging functionality to match modern business practices. This might include receipt scanning, email scanning, bank statement synchronisation and drag and drop file uploads.

Automated categorisation:

One of the major benefits of MTD will be efficiency gains from automation. Ensure your software can automate the categorisation of expenses, reconciliation and cash coding.

Sole trader and landlord-specific design:

Managing multiple income sources and splitting bank statement lines for processing will make your life much easier. Look out for features like custom categories and the ability to manage disallowables, apportionment and property within a single account for an individual.

Data extraction and automation:

Give yourself control and visibility on how you support self-employed and landlord clients. Ensure the software you choose has quick and accurate data extraction tools.

Tax workflow support:

You’ll want to make sure the digital bookkeeping software you use offers easy access to summary totals and automatic generation of tax returns, ready for upload into the accounting software you use.

Compatible with HMRC:

Critically, any technology you invest in must be HMRC-recognised software for MTD ITSA. This ensures compliance with important specifics, including the ability to categorise transactions in line with HMRC guidelines and provide quarterly updates. You can find a full list of approved vendors by HMRC here.

Whilst MTD ITSA is set to force individuals to start keeping digital records from April 2026, these are all features that will be beneficial to any sole trader or landlord from today. They will help them keep their business affairs in better order, streamline data collection and enable better financial decision-making. It’s important to explain the benefits of bookkeeping automation for small businesses to your clients from day one.

Once you’ve found a tool you trust, it will be worth having conversations with relevant clients ahead of the 2026 deadline about shifting to digital bookkeeping as soon as possible.

Communicate clearly to build stronger client relationships

The quarterly nature of sending updates to HMRC under MTD ITSA will result in far more client exposure for accountants and bookkeepers. This offers you a chance to become a valued business partner as opposed to a necessary cost as part of the taxation system.

Regular digital record-keeping can bring about genuine positive change to clients’ businesses.

Good communication will be key, not only in guiding clients through the set-up process but longer term via more frequent interactions. Sole traders will be forced to take a more methodical approach to their business finances. In the long run, this will provide a clearer picture of their operations. With your guidance and support, this can enable more informed decision-making and better financial outcomes.

It’s time to get ready for 2026 today

The moving goalposts around MTD ITSA and its implementation deadline have undoubtedly sown confusion for the self-employed and landlords.

One thing we do know is that (as things stand) eligible sole traders will need to start keeping digital records and making quarterly updates from April 2026 onwards. Even if your self-employed clients earn less than the initial £50,000 p.a. threshold or this date gets shifted further out, there’s huge value in starting digital bookkeeping today.

It's worth keeping a close eye on the upcoming Autumn Budget, as announcements could well have implications for MTD ITSA.

Digital record-keeping software not only reduces the potential for errors, it gives individuals a holistic view of their incomings, outgoings and future tax obligations in close to real time. This information can be used, with expert guidance from accountants and bookkeepers, to make better decisions and drive growth.

Dext Solo is our purpose-built solution for self-employed individuals and landlords. Not only is it MTD compliant, it has been designed to give clients and their advisors everything they need to make digital record keeping a breeze, while ensuring utmost data security and seamless collaboration.

If you're ready to make a start on MTD ITSA – irrespective of how much or little prep you've done so far – now is the perfect time to do so. To help you along the way, click below to get your ready-made plan for 2026.

The road to 2026 – Your plan for MTD ITSA