MTD ITSA explained: what every cleaning business sole trader needs to know now it's live

If you run a cleaning business as a sole trader with self-employment income above £50,000, Making Tax Digital for Income Tax Self Assessment — MTD ITSA — is already live for you. It went into effect on 6 April 2026, replacing the annual Self Assessment return with a system of quarterly digital submissions. The first Q1 update (covering 6 April to 5 July 2026) is due by 5 August 2026.

For most cleaning business owners, the annual tax return has been the only formal interaction with HMRC beyond paying what you owe. MTD ITSA changes that fundamentally. Miss a quarterly update and there's a penalty point. Fail to use HMRC-recognised software and your submission won't count. This isn't a marginal admin change — it's a structural shift in how sole traders are taxed.

This article covers everything you need to know: what MTD ITSA actually requires, which thresholds apply when, what the penalties look like, and what compatible software means in practice.

What is MTD ITSA?

MTD ITSA is the extension of Making Tax Digital — the government's programme to move the UK tax system online — to Income Tax for self-employed individuals and landlords. The VAT version, MTD for VAT, has been in place since 2019. MTD ITSA brings the same quarterly digital requirement to Income Tax.

Under MTD ITSA, instead of filing one Self Assessment return every January, sole traders will need to:

1. Maintain digital records of their income and expenses throughout the year
2. Submit a quarterly update to HMRC via approved software — four times per year
3. Submit an End of Period Statement (EOPS) at the end of the tax year, confirming the quarterly figures are accurate
4. Complete a Final Declaration — the equivalent of the existing Self Assessment return — by 31 January following the tax year

The quarterly updates are not tax payments — they're data submissions. You're telling HMRC your income and expenses for each quarter so they can maintain a running estimate of what you'll owe. The actual tax payment deadlines remain 31 January and 31 July.

The rollout timeline: when does it affect you?

HMRC phased MTD ITSA in by income threshold. The original rollout dates were pushed back in 2022 and again in 2023 — the current confirmed schedule is:

The £50,000 and £30,000 thresholds refer to your gross self-employment income, not your profit. If you're turning over £50,000 in cleaning contracts, you're in the first wave regardless of what's left after costs.

Does this affect your cleaning business?

To check whether you're in scope now, look at your 2024-25 Self Assessment return (filed by January 2026). If your gross self-employment income from cleaning — the total you invoiced, before any expenses — was above £50,000, you are in the first wave and MTD ITSA applies to you from 6 April 2026.

A few points that trip cleaning business owners up:

• It's gross, not net. Many cleaning businesses have significant expenses — materials, mileage, insurance, staff costs. The £50,000 threshold applies to your total income before you subtract any of those. A business turning over £58,000 and netting £32,000 after costs is still in the first wave.
• Multiple income sources count together. If you earn from both cleaning and, say, a rental property, the combined income is what HMRC looks at for threshold purposes.
• The threshold is assessed annually. If your income dips below £50,000 in a later year, you may exit the MTD ITSA requirement — but you should not assume this in advance.
• Partnerships and limited companies are not included in this phase. MTD ITSA currently applies to sole traders and individual landlords only.

Quarterly submission deadlines

MTD ITSA divides the tax year into four quarters with the following submission deadlines:

Note that HMRC has also confirmed an alternative quarterly period option, where quarters run to the end of the calendar month (30 April, 31 July, 31 October, 31 January) rather than the 5th. Some software providers use this simpler calendar-aligned option — confirm which your software uses during setup.

The penalty regime: what happens if you miss a submission

HMRC introduced a new points-based penalty system for MTD ITSA. Each missed submission earns a penalty point. Once you accumulate enough points — the threshold depends on how often you're required to submit — a fixed financial penalty is triggered.

For quarterly submitters (which applies to most sole traders under MTD ITSA), the threshold is four penalty points, at which point a £200 fine is charged. Points expire after a period of compliance, but each subsequent missed submission after reaching the threshold triggers another £200 penalty.

Separate late payment penalties also apply on any unpaid tax — these are not new, but they continue to apply alongside the points system.

What "HMRC-recognised software" actually means

MTD ITSA submissions cannot be made through HMRC's own portal. You must use software that is recognised by HMRC for MTD ITSA and that connects directly to HMRC's API (application programming interface) to transmit your quarterly data.

What this means in practice:

• You cannot use a spreadsheet and manually enter figures into HMRC's website
• You cannot file on behalf of yourself using the existing Self Assessment portal after April 2026
• Your software must be capable of bridging to HMRC's API — either natively or via a bridging software tool
• HMRC maintains a list of recognised software providers on GOV.UK

Not all bookkeeping or accounting software will qualify. The software must have been through HMRC's recognition process and must be maintained to reflect any API changes HMRC introduces. Check HMRC's published list of recognised software on GOV.UK before committing to a provider.

Cadi is building toward HMRC recognition for MTD ITSA. The API integration, fraud headers and quarterly submission logic are already functional in HMRC's sandbox environment. Recognition is subject to HMRC's formal application process, which we are actively progressing.

Digital record-keeping requirements

MTD ITSA doesn't just change when and how you submit — it mandates digital record-keeping throughout the year. You must maintain digital records of:

• Business income (the date, amount and description of each transaction)
• Business expenses, categorised correctly (materials, mileage, insurance, etc.)
• Any allowances claimed

Paper receipts and bank statements alone will no longer be sufficient as your record-keeping method, even if they back up digital entries. The source of truth for HMRC must be your digital software records.

For cleaning businesses, this is less about extra effort and more about shifting your existing admin — recording income from jobs, expenses on products and fuel, mileage claims — into digital software rather than a spreadsheet or notebook. If you're already using accounting software, you may already be most of the way there.

What to do now — a practical checklist

If you're above the £50,000 threshold, MTD ITSA is already in effect for you. Here is the practical sequence if you haven't already acted:

1. Enrol in MTD ITSA immediately. If you haven't already signed up through HMRC's service, do it now. Your first quarterly update (Q1: 6 April – 5 July) is due on 5 August 2026.
2. Choose and set up MTD ITSA-compatible software. You cannot file through HMRC's website — you must use recognised software. Check GOV.UK's list and get set up before your first submission is due.
3. Backfill your digital records for Q1. Even if you haven't been recording digitally since 6 April, reconstruct your income and expenses from bank statements, invoices and receipts so your first submission is complete and accurate.
4. Talk to your accountant. If you use one, confirm they are working within the MTD ITSA framework and understand how your quarterly data flows to them. Some accountants will want to review each quarter before submission — agree on a process now.
5. Set calendar reminders for all four deadlines. 5 August, 5 November, 5 February and 5 May. Missing any of these earns a penalty point.

Exemptions and deferrals

HMRC does allow some exemptions from MTD ITSA, though these are narrowly defined:

• Age and disability: If it is not reasonably practicable for you to use digital tools due to age, disability or other circumstances, you can apply for an exemption.
• Religious grounds: Some exemptions are available on religious grounds where use of computers is incompatible with beliefs.
• No internet access: If you have no reasonable means of internet access, an exemption can be applied for — though HMRC's bar here is higher than you might expect.

Exemptions are not automatic. You must apply to HMRC and receive confirmation. If you believe you may qualify, contact HMRC or speak to your accountant as soon as possible — penalties accrue from 6 April 2026 if you are in scope and have not been granted an exemption.

How Cadi handles MTD ITSA

Cadi is built around MTD ITSA from the ground up — not as an add-on to existing software. The connection to HMRC's API, the fraud headers required by HMRC's technical specification, the quarterly obligation tracking and the submission flow are all part of the core product, not a separate module you activate.

From inside Cadi, you can see your current quarter's income and expenses updating in real time as you log jobs and record costs. When a quarter closes, Cadi generates your quarterly update, you review it, and submit directly to HMRC without leaving the app. Your End of Period Statement and Final Declaration follow the same process.

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