MTD ITSA Eligibility: Does My Income Mean I Have to Join?
Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is set to revolutionise how millions of self-employed individuals and landlords manage their taxes. However, one of the most common questions we get at Merranti Accounting is:
“Does my income mean I have to join MTD ITSA?”
This blog will guide you through MTD ITSA eligibility, income thresholds, how HMRC assesses your income, and what steps you need to take now. Plus, we’ll explain how Merranti can help you comply easily and affordably with this major change.
What is MTD ITSA?
MTD ITSA stands for Making Tax Digital for Income Tax Self Assessment. From April 2026, certain taxpayers will need to:
- Keep digital records of their income and expenses.
- Send quarterly summaries to HMRC.
- Submit a final year-end declaration via compatible software.
The goal? A more modern, accurate, and real-time tax system.
Who is Required to Join MTD ITSA?
The government is phasing in MTD ITSA gradually. From April 2026, the following individuals must comply:
- Self-employed people with total qualifying income over £50,000 per year (combined across businesses).
- Landlords with rental income above £50,000.
- Individuals with combined income from self-employment and property over £50,000.
From April 2027, the threshold drops to £30,000, and from April 2028, it’s expected to reduce to £20,000. So even if you’re under the threshold now, it’s worth preparing.
What Counts as “Qualifying Income”?
A key point of confusion is what types of income count toward the threshold. Here’s a breakdown:
| Type of Income | Counts Toward MTD ITSA? |
|---|---|
| Self-employment income | ✅ Yes |
| Property rental income | ✅ Yes |
| Employment (PAYE) income | ❌ No |
| Pension income | ❌ No |
| Dividends | ❌ No |
| Investment income | ❌ No |
So, if you earn £28,000 from freelance design and £25,000 from rental property, your total qualifying income is £53,000 — which puts you above the April 2026 threshold.
How HMRC Assesses Your Income
Eligibility is based on your total qualifying income two years prior to the start of MTD. So:
- For the 2026 start, HMRC will use your 2024/25 tax return.
- If your income exceeded £50,000 in that year, you’ll be mandated into MTD from April 2026.
- Even if your income drops later, you may still have to comply unless you opt out (more on that shortly).
⚠️ Important: HMRC sends out “notice to file” letters based on their records, so if your 2024/25 return is incorrect or not filed, you risk being included unnecessarily or missing the notice.
What If My Income Changes?
Let’s say you were above £50,000 in 2024/25, but have since retired or your rental property was sold. You still may be mandated into MTD.
However, HMRC provides an “opt-out” option after three years of qualifying income below the threshold.
Example:
- £52,000 in 2024/25 → mandated from 2026
- £30,000 in 2025/26, 2026/27, and 2027/28 → then eligible to opt out from 2029
Examples of Eligibility Scenarios
Case 1: Sole Trader Only
- Income: £60,000 from consulting
- Result: ✅ Must comply with MTD ITSA from April 2026
Case 2: Landlord Only
- Rental income: £48,000
- Result: ❌ Not required yet (threshold not met), but prepare for 2027 (£30k threshold)
Case 3: Combined Income
- £32,000 from self-employment + £22,000 from property
- Combined = £54,000 → ✅ MTD ITSA applies
Case 4: PAYE + Side Hustle
- £70,000 from employment (PAYE), £15,000 from property
- Result: ❌ Exempt — PAYE doesn’t count; total qualifying income = £15k
What If I Don’t Join?
Failing to comply when required could lead to:
- Missed deadlines
- Late submission penalties
- Potential £3,000+ fines per year
- Loss of visibility over your tax position
It’s far better to act now and avoid stress and penalties later.
Merranti Accounting’s MTD ITSA Services
At Merranti Accounting, we’re already helping sole traders and landlords prepare for MTD ITSA through our dedicated digital compliance support. Here’s how we can help:
✅ Free MTD Eligibility Check
We’ll check your income sources and advise whether and when MTD ITSA applies to you.
✅ Low-Cost MTD Solution
We offer a streamlined, budget-friendly digital solution starting from just £7/month using Xero Simple, including:
- Receipt scanning (Hubdoc)
- Basic invoicing
- Real-time tracking
- MTD ITSA filing via bridging software or Xero Tax
✅ Quarterly Review & Reminders
Our team — or our in-house AI assistant “Martin” — will send reminders and check that your submissions are on time and correct.
✅ Digital Record-Keeping Support
Whether you prefer apps, spreadsheets, or need a full walkthrough — we’ll help you stay compliant without extra stress.
✅ Onboarding and Training
You don’t need to be tech-savvy. We’ll train you or your bookkeeper to keep records in the right format. We also have tools to automate as much as possible.
Why Choose Merranti?
Our difference is personal. We’re not a faceless software provider. You’ll have:
- A dedicated accountant
- Hands-on support
- Local offices in Surrey, Sussex, and beyond
- A digital system that works with you, not against you
We’re already managing over 300 clients through our automated MTD onboarding system, and we can easily add your business too.
Final Thoughts
MTD ITSA isn’t just a box-ticking exercise — it’s a shift in how you manage your business finances. If you’re a sole trader or landlord, it’s crucial to understand:
- Whether you qualify now (or will in future)
- How to keep digital records
- What software and support you’ll need
- Why early preparation means less stress
Merranti Accounting is ready to guide you from day one. Whether you’re just over the threshold or unsure if MTD applies to you — we’ll make it simple, affordable, and fully compliant.
Find more about MTD ITSA here.
