HMRC January 2026 Deadline: 5 Critical MTD ITSA Changes Sole Traders And Landlords Must Know
The January 2026 deadline is not just another Self Assessment date; it is the final countdown. As of the current date, December 22, 2025, the UK's tax landscape is on the cusp of its most significant transformation in decades, driven by HMRC's Making Tax Digital for Income Tax Self Assessment (MTD ITSA) initiative. The traditional 31 January 2026 deadline for your 2024/2025 tax return will be the last major filing under the old system before the mandatory digital reporting regime begins for hundreds of thousands of sole traders and landlords just a few months later. This article breaks down the five most critical, up-to-date changes you must prepare for immediately to avoid penalties and ensure a smooth transition into the digital era of taxation.
The transition to MTD ITSA is more than a simple change of form; it represents a fundamental shift in how business and property income is recorded and reported to HMRC. This new system replaces the single annual tax return with a series of mandatory quarterly updates, followed by an End of Period Statement (EOPS) and a final declaration. Understanding the new timeline and requirements is crucial for anyone affected by the £50,000 income threshold.
The HMRC January 2026 Deadline and the MTD ITSA Timeline
The "HMRC January 2026 deadline" serves as a pivotal point in the tax calendar, bridging the gap between the old system and the new digital mandate. It is essential to distinguish between the two key dates surrounding this period.
- 31 January 2026: This is the established deadline for submitting your Self Assessment tax return for the 2024 to 2025 tax year. This is the last full tax year filing before MTD ITSA becomes mandatory for the first phase of taxpayers.
- 6 April 2026: This is the mandatory start date for MTD ITSA for the first cohort of taxpayers. From this date, affected individuals must begin keeping digital records and submitting quarterly updates for the 2026/2027 tax year.
The proximity of these two dates means that while you are finalising your 2024/2025 return in January 2026, you should already have your MTD-compliant software and digital record-keeping processes in place to start the new tax year.
Who Must Comply with MTD ITSA from April 2026?
The initial phase of Making Tax Digital for Income Tax Self Assessment is targeted at individuals with higher levels of business and property income.
- Sole Traders and Landlords: MTD ITSA becomes mandatory for individuals who receive a gross aggregate income from self-employment and/or property of more than £50,000 per year.
- Exemptions: Trustees, personal representatives, non-resident companies, and individuals who do not meet the income threshold are currently exempt.
The government estimates that approximately 795,000 sole traders and landlords will be affected by this initial £50,000 threshold. It is vital to calculate your gross income correctly to determine your compliance date.
5 Critical Changes You Must Prepare For Now
The shift to MTD ITSA fundamentally alters five core aspects of tax compliance. Ignoring these changes will lead directly to the new points-based penalty regime.
1. Mandatory Digital Record-Keeping
Under MTD ITSA, you can no longer rely on paper receipts, spreadsheets, or manual ledgers. You must use HMRC-recognised, MTD-compatible software to keep digital records of all your business and property transactions.
Key Entities (Software): The market is full of compliant software options. Popular choices include Xero, Sage, QuickBooks, TaxCalc, and Digita. Landlords may also find niche software like Landlord Studio or RentalBux beneficial. HMRC maintains a full list of approved providers, and many offer free or low-cost options for smaller businesses.
2. The New Quarterly Reporting Schedule
The most significant change is the move from one annual submission to four mandatory quarterly updates. These updates must be submitted to HMRC via your MTD software and are essentially summaries of your income and expenses for the period.
MTD ITSA Quarterly Deadlines (Tax Year Basis):
- Quarter 1 (6 Apr – 5 Jul): Deadline 5 August
- Quarter 2 (6 Jul – 5 Oct): Deadline 5 November
- Quarter 3 (6 Oct – 5 Jan): Deadline 5 February
- Quarter 4 (6 Jan – 5 Apr): Deadline 5 May
For the first year of MTD ITSA (2026/2027), the first quarterly update will be due by 5 August 2026, covering the period from 6 April to 5 July 2026.
3. End of Period Statement (EOPS) and Final Declaration
Submitting the four quarterly updates is not the end of the process. After the end of the tax year (5 April), you must complete two further submissions:
- End of Period Statement (EOPS): This allows you to make any necessary accounting adjustments, claim capital allowances, and finalise your business or property income figures for the year.
- Final Declaration: This replaces the traditional Self Assessment form. It incorporates the EOPS figures, along with any other sources of income (e.g., employment, dividends, interest), to finalise your tax liability. The deadline for this final declaration remains 31 January following the end of the tax year (e.g., 31 January 2027 for the 2026/2027 tax year).
4. The New Points-Based Penalty Regime
HMRC is introducing a new points-based penalty system for MTD ITSA, designed to penalise persistent non-compliance rather than one-off errors.
- Late Submission: For each missed quarterly deadline, you will receive a point. Once you reach a certain threshold of points (typically 4 points for quarterly filers), a financial penalty of £200 is issued.
- Late Payment: Penalties for late payment of tax will also apply, starting at 2% of the unpaid tax after 15 days and increasing thereafter, plus daily interest.
Crucially, the government has announced a 'soft landing' period, meaning taxpayers entering MTD ITSA will not face late filing penalties in their first year (2026/2027), providing a vital window to adjust to the new system.
5. The Next Income Threshold in April 2027
While the focus is currently on the £50,000 threshold, businesses and landlords with a gross income between £30,000 and £50,000 must prepare to join the MTD ITSA regime from April 2027. If your income is currently near the £50,000 mark, or you expect it to grow, you should plan for MTD compliance now to avoid a rushed transition later.
Action Plan: How to Prepare for the April 2026 Digital Shift
For sole traders and landlords who will be impacted by the April 2026 deadline, preparation needs to start well before the January 2026 Self Assessment submission. The following steps should be prioritised:
- Assess Your Income: Confirm your total gross income from self-employment and property. If it exceeds £50,000, MTD ITSA is mandatory from April 2026.
- Choose MTD Software: Research and select an HMRC-recognised MTD-compatible software package. Consider factors like cost, ease of use, and whether it integrates with your existing bank accounts or other business tools.
- Start Digital Record-Keeping Early: Begin using your chosen software to record transactions now, even if you are not yet submitting to HMRC. This will allow you to practice and iron out any issues before the mandatory start date.
- Review Your Accounting Period: MTD ITSA works best with accounting periods that align with the tax year (6 April to 5 April). If your current period is different, consult with an accountant to determine if a change is beneficial to simplify quarterly reporting.
- Engage Your Agent: If you use an accountant or tax agent, contact them immediately to confirm their MTD compliance strategy and how they plan to manage your quarterly submissions.
The January 2026 deadline marks the end of an era. By tackling the MTD ITSA requirements now, you can transform a potential compliance headache into a streamlined, efficient digital accounting process.
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