MTD ITSA scope from April 2026 — the complete firm’s guide

Making Tax Digital for Income Tax Self Assessment (MTD ITSA) commenced on 6 April 2026 under the Income Tax (Digital Requirements) Regulations 2021 (SI 2021/1076), as amended, with enabling provisions in Schedule 1 to the Finance Act 2022. The scope is narrower than many partners assume, and the threshold mechanics contain several traps that produce wrong answers when applied casually. This guide is the working reference for partners and senior staff triaging their client book.

The scope test — in one sentence

A UK-resident individual is in scope of MTD ITSA for a tax year if their qualifying income — gross receipts from self-employment plus gross property income — for the relevant test year is above the applicable threshold. Everything else in this guide is mechanics around that test.

Qualifying income is gross, not net

The threshold is on gross trading and property receipts, before deductions for expenses, finance costs, capital allowances, or the property and trading allowances. Per the regulations, this corresponds to the “turnover” or “property income receipts” figure on the Self Assessment return — boxes that report the top-line, not the taxable profit. A client with £55,000 of rent and £40,000 of expenses sits well below £20,000 of taxable profit but is firmly in the 2026 wave.

Self-employment and property are aggregated

Qualifying income from trades and from property is added together for the threshold test. A client with £30,000 of property income and £25,000 of sole trader turnover has £55,000 of qualifying income and is in the 6 April 2026 wave, even though neither source on its own would have triggered the regime.

The roll-out: £50k, £30k, £20k

The regulations stage the threshold downwards over three tax years:

• From 6 April 2026 — qualifying income above £50,000.
• From 6 April 2027 — threshold drops to £30,000.
• From 6 April 2028 — threshold drops to £20,000.

Once a client is mandated, they remain in MTD ITSA in subsequent years until their qualifying income has fallen below the then-current threshold for three consecutive tax years, at which point they may exit (subject to notifying HMRC).

Worked example — mixed income, mid-cohort

Mrs A files her 2024/25 Self Assessment showing:

• Sole trader turnover (consultancy): £25,400
• Gross rents on two BTLs: £29,800
• PAYE salary (part-time NHS role): £18,200
• Bank interest: £640
• UK dividends: £1,210

Qualifying income is the sum of the first two lines only: £25,400 + £29,800 = £55,200. PAYE, interest, and dividends do not count towards the threshold under the regulations. £55,200 exceeds £50,000, so Mrs A is mandated from 6 April 2026 and must submit quarterly updates for both the trade and the property business, plus a Final Declaration that pulls in the PAYE, interest, and dividends. If her property receipts had been £20,000 instead of £29,800, total qualifying income would have been £45,400 — under the 2026 threshold but over the 2027 threshold, so she would join the second wave.

Who is not in scope

The regime does not currently mandate the following groups, even where total income is high:

• PAYE-only clients. Employment income is outside qualifying income.
• Pure investment-income clients. Bank and building society interest, UK and overseas dividends, and other savings income do not count.
• Pension income only. State, occupational, and personal pension receipts are excluded.
• Partners in partnerships are not yet mandated in their capacity as partners. General and limited partnerships are scheduled to be brought in later (date not yet fixed by regulations at time of writing). A partner with separate personal property income is tested on that property income alone.
• Companies and the income of trusts and estates are outside MTD ITSA entirely. Trustees of relevant property trusts continue to file SA900; companies file CT600.
• Capital gains do not count towards qualifying income, even where the gain is reported on Self Assessment.

The bare-trust beneficiary point

Where a bare trust holds let property for a beneficiary, the income is treated as the beneficiary’s for income tax purposes (ITA 2007 principles, as applied through the property income regime). The beneficiary’s qualifying income includes that property income — even where the trustees administer the lettings. Practical effect: an adult child who benefits from a parent’s bare trust over a let flat is tested on the rent.

How HMRC works out the threshold

HMRC uses the qualifying income reported on the most recent Self Assessment return filed by 31 January before the start of the tax year. For the 6 April 2026 wave, that’s the 2024/25 return filed by 31 January 2026. HMRC issues notification letters in the months preceding the start of the relevant tax year.

Because the assessment is backward-looking by a year, a client whose income has fallen sharply can still be pulled in. The regulations contain a provision for HMRC to take account of current-year information on application — see the appeal route below.

The appeal / wrong-cohort route

Where the firm believes a client has been wrongly assessed as in scope, the route is to apply to HMRC for the determination to be revisited. Common grounds:

• The reported figures included a one-off item (e.g. a terminated trade, a one-off property disposal misclassified as income) that won’t recur.
• Income has dropped permanently below the threshold and the client can evidence this from current management figures.
• The figures on the return were wrong and a correction has been submitted.

Applications go via the agent services account. Until HMRC confirms removal, the safer course is to assume the client is in scope and prepare accordingly. Firms should not advise clients to ignore a mandation letter on the basis of an unresolved dispute.

Voluntary opt-in for clients below the threshold

A client whose qualifying income is below the applicable threshold may volunteer to join MTD ITSA early. The usual driver is operational rather than tax — a client whose firm has already moved its workflow onto MTD-compatible software may prefer to file everyone on the same cadence. Voluntary opt-in is reversible: the client can step back out for the next tax year by notifying HMRC, provided they are still below the threshold.

From a firm’s perspective, voluntary opt-in is also useful for sub-threshold clients who plan to grow into mandation shortly — they have a clean first year of digital records by the time mandation bites, rather than scrambling on day one.

Edge cases worth knowing

Joint property — count your half, not the gross

Where property is held jointly, qualifying income is the client’s share of the gross receipts, not the whole let. A 50/50 BTL grossing £40,000 contributes £20,000 to each owner’s qualifying income. A married couple holding jointly is taxed 50/50 by default unless a Form 17 election is in place — and where Form 17 is in place, the split for MTD purposes follows beneficial ownership. See our guide to joint property income and Form 17 for the mechanics.

Furnished Holiday Lets after the FHL repeal

From 6 April 2025 the FHL regime was abolished and FHL receipts now sit inside the ordinary UK or overseas property business. That means FHL gross income counts as qualifying income in the normal way. Clients who previously sat below the threshold purely because FHL income was treated separately should be re-tested. See our FHL repeal guide for context.

Overseas property

Overseas property income reported on the foreign pages counts towards qualifying income on the same basis as UK property. A client with a single UK BTL grossing £18,000 and an EU rental grossing £14,000 has £32,000 of qualifying property income — inside the 2027 wave.

Income shares from partnerships and LLPs

A partner’s share of partnership trading or property profits is not currently included in their personal qualifying income for the 2026 mandation, because partnerships themselves are scheduled to come in separately at a later (unfixed) date. Where the same individual also has personally held property, only the personal property income is tested. This is the most common scope question we field from firms.

Ministers of religion, share fishermen, Lloyd’s underwriters

Each of these specialist regimes has its own deferral or exclusion. If a client falls into one of them, treat them as out of scope for the 2026 wave and confirm against current HMRC guidance before each tax year — the exclusions are being reviewed annually.

Practical scoping for the firm

A clean way to triage the book before each wave:

1. Pull every client’s most recent SA return and extract the gross self-employment turnover (box on SA103) and gross property receipts (boxes on SA105 and SA106).
2. Sum the two. Compare to the threshold for the wave you are scoping (£50k, then £30k, then £20k).
3. Flag clients within 10% of the next threshold band as “likely next wave” — those are the ones to onboard to digital record-keeping early so the first quarter isn’t a scramble.
4. For any client with mixed sources, joint property, or recent structural change (new BTL, terminated trade, FHL conversion), do the test by hand rather than from the SA total — the SA total is the right input, but the temptation to use taxable profit instead of gross receipts is the most common error.