Where we are right now (May 2026)
HMRC originally projected around 864,000 sole traders and landlords in Phase 1. The first quarterly update for the 6 April to 5 July 2026 period is due 7 August 2026. If you're crossed the £50k threshold and not yet enrolled, you can still catch up cleanly if you act in the next few weeks.
HMRC has confirmed a soft-landing for late submission penalty points during the first MTD ITSA year, but the Final Declaration deadline (31 January 2028) is firm and you do still need to be enrolled. Late payment penalties run on a separate track with no soft landing.
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Written by the chartered accountants team at LOYALS
Updated for May 2026 reality. For the full mechanics including software setup, multi-business handling, basis period overlaps and catch-up plans, see our deep guide linked below. King's Cross, London. Mon to Sat 10am to 7pm. Sundays for emergencies.
SECTION 01
The three phases at a glance.
MTD ITSA rolls out in three waves based on qualifying income. The threshold is tested two years before each phase starts.
MTD ITSA rollout
6 April 2026
Phase 1
£50,000+ qualifying income
Live now
6 April 2027
Phase 2
£30,000+ qualifying income
11 months
6 April 2028
Phase 3
£20,000+ qualifying income
23 months
What "qualifying income" means
Gross income before expenses, from these sources combined:
- Self-employment trades (all of them, summed)
- UK property rental income
- Overseas property income
These do NOT count: PAYE wages, partnership income (deferred indefinitely), dividends, savings interest, pensions, capital gains.
It's gross, not profit
The £50k threshold is your turnover before expenses. A sole trader with £55k of gross income and £30k of expenses (so net profit of £25k) is still in Phase 1. The threshold doesn't care about your bottom line.
SECTION 02
Are you in Phase 1 right now?
A two-question check that resolves most situations cleanly.
Quick MTD check
In 2024/25, did your gross self-employment + property income exceed £50,000?
YES ↓NO ↓
YES, you are in Phase 1You should already be enrolled. First quarterly update due 7 August 2026. If you've not enrolled yet, see Section 06.
Check Phase 2 and Phase 3If 2025/26 will exceed £30k → Phase 2 from April 2027. If 2026/27 will exceed £20k → Phase 3 from April 2028.
SECTION 03
The MTD calendar.
Seven submissions per business per year (in Phase 1). Quarterly updates plus EOPS plus the Final Declaration.
2026/27 MTD ITSA calendar (per business)
Q1 update
6 Apr to 5 Jul 2026
Due by 7 August 2026
Q2 update
6 Jul to 5 Oct 2026
Due by 7 November 2026
Q3 update
6 Oct to 5 Jan 2027
Due by 7 February 2027
Q4 update
6 Jan to 5 Apr 2027
Due by 7 May 2027
EOPS
End of Period Statement
Due by 31 January 2028
Final Declaration
Replaces SA100, computes final tax
Due by 31 January 2028. Balancing payment also due this date.
Multiple businesses = multiple cycles
Each separate self-employment trade and each property business has its own four quarterly updates plus its own EOPS. So a sole trader with one trade plus one rental property has 8 quarterly updates, 2 EOPSs, plus the single Final Declaration = 11 submissions per year. This is the practical reason most clients delegate.
SECTION 04
Penalties: what missing a deadline costs.
Two regimes, both running in parallel. Late submission uses a points-based system; late payment uses a separate cumulative escalator.
Late submission: points-based
Each missed submission earns 1 point. At 4 points (the threshold for quarterly filers), you trigger a £200 fine, then £200 for every subsequent late submission until points clear after 24 months of full compliance.
How the points-based system bites
1
→
2
→
3
→
4
→
£200
fine
→
£200
each
more
Each late quarterly submission = 1 point. At 4 points, the £200 penalty kicks in. Then every subsequent late submission triggers another £200, regardless of how late. Points only clear after 24 months of perfect compliance.
Year 1 soft-landing for late submission
HMRC has confirmed that late submission penalty points will not be applied during the first MTD ITSA year (2026/27) for taxpayers in Phase 1. The Final Declaration on 31 January 2028 is NOT covered by this soft-landing; that deadline is firm. Late payment penalties also continue to apply in full from day one.
Late payment: cumulative escalator
If you miss the payment deadline (Final Declaration tax due 31 January 2028 onwards), the penalties stack and escalate.
Day 1 to 15 late
No penalty (yet)
But late payment interest accrues from day one at Bank of England base rate + 4%.
Day 16
2% of unpaid tax
First fixed penalty. Plus continuing interest.
Day 31
Another 2% of unpaid tax (4% total)
Second fixed penalty. £10,000 unpaid at day 31 = £400 in penalties so far plus interest.
Day 31 onwards
4% per year annualised
Daily-accrued penalty at 4% per year on the unpaid balance. Combined effective cost can exceed 12%/year with interest.
SECTION 05
What you actually have to do.
Three things. Get software. Enrol with HMRC. File quarterly. The deep guide covers the mechanics; this is the high-level checklist.
1. Get HMRC-recognised software
Common picks for sole traders:
- FreeAgent: often free with NatWest, RBS or Mettle business accounts
- Xero: £15-£30/month, popular for growing businesses
- QuickBooks: £10-£25/month, simple sole trader through small Ltd
- Sage Business Cloud: £14-£30/month
- Bridging software + spreadsheet: if you want to keep using a spreadsheet, £5-£15/month for the bridge plus your existing setup
2. Enrol for MTD ITSA with HMRC
Enrol via your Government Gateway account and authorise an agent (us, if applicable). Your agent's authorisation must be in place before they can file on your behalf. Allow a few days for HMRC to process.
3. File quarterly
Each quarter, total your business income and expenses for the period and submit via your software. Errors in earlier quarters can be corrected in subsequent ones; you don't have to be perfect first time. The Final Declaration is where final tax is computed and paid by 31 January following the tax year end.
Want the full mechanics?
Our comprehensive MTD ITSA guide covers software setup, multi-business handling, basis period overlap, joint property treatment, catch-up plans for missed enrolment and how to appeal penalty points.
Read the full guide →
Already non-compliant or running out of time?
We backdate Phase 1 enrolment, file the missing quarterly updates, set up your software, and represent you on penalty appeals. Free 15-min triage to scope it.
Book a free 15-min call
SECTION 06
How LOYALS helps.
Real services, honest pricing. Pick the level that fits how much you want to delegate.
What we do for MTD-affected clients
- Monthly accounting from £85/month for a typical single-business sole trader. Includes software setup, bookkeeping, all four quarterly submissions, EOPS, Final Declaration, all HMRC correspondence. See MTD for Income Tax.
- Catch-up service if you've missed Phase 1 enrolment. Backdate enrolment, reconstruct missed quarters from bank data, file the missing updates, represent you on penalty appeals where reasonable excuse applies. Fixed fee quoted at the scoping call.
- One-off MTD setup if you want to file yourself but need help getting set up. Software selection, configuration, agent authorisation, training. Fixed fee.
- Self Assessment for the 2025/26 transitional year (you still file an SA100 in January 2027). From £180 fixed fee. See Self-Assessment & Personal Tax.
Industry pages with MTD context
If you want guidance specific to your trade:
- Construction & CIS — how CIS deductions and MTD quarterly updates work together
- Freelancers — variable income, multiple clients, working from home expenses under MTD
- Landlords — rental property income consolidation, joint ownership
- Hospitality — sole trader cafe, catering, food businesses under MTD
What sets us apart
Chartered accountants, not bookkeepers. Mon to Sat 10am to 7pm, Sundays for emergencies. Fixed monthly fees with no surprise year-end bills. Free 15-min scoping call before you commit. King's Cross office plus remote service across the UK.
