The rules are more precise than they first appear, and treating every change the same way can leave you either submitting quarterly updates you no longer need to send, or missing the ones you do. This article sets out what applies to each situation.
If you have not yet established whether MTD ITSA applies to you, our complete guide to MTD ITSA for sole traders and landlords covers eligibility, thresholds and deadlines from the start. This article picks up from there, for anyone already signed up.
At a Glance
| Situation | What generally happens |
|---|---|
| You stop one income source, others continue | You tell HMRC and finish reporting for that source; MTD continues for the rest |
| You stop your only income source | You leave MTD after the respective tax year's return is filed |
| Your qualifying income falls below the threshold | You stay in MTD until it has been below the relevant threshold for three consecutive tax years |
| You start a new self-employment or property business | Reporting through MTD is delayed by a year; the income still goes on your tax return in the meantime |
| You start letting another UK property | Folded into your existing property business, with no delay or separate notification |
| You sell a rental property | Only relevant to MTD if the rental income itself stops, not because of the sale as such |
The rest of this article explains each of these in turn.
Stopping One Income Source While Another Continues
Stopping one of several income sources does not end your MTD obligations. You need to tell HMRC that the one source ceased, and continue creating digital records and sending quarterly updates for everything else.
Take a sole trader who also lets out a flat. If the trading business closes but the letting continues, HMRC needs the cessation date entered through the HMRC online services account (or via an agent), and any outstanding quarterly updates for the ceased business completed up to the period it stopped. Quarterly updates for the letting continue exactly as before.
The cessation must be reported by the quarterly update deadline for the period in which the source stopped. If the business ended in May, the quarterly update covering that period, due 7 August, would still need to be sent, but it would be the last one for that source.
There is a separate point worth flagging for landlords. If you stop letting one of several UK properties but keep letting the others, this is not treated as ceasing an income source at all. HMRC treats all UK rental properties as a single property business, so stopping one, while others continue, requires no notification. The business is still trading, simply with one fewer property in it. Property-specific detail, including joint ownership and expense treatment, is covered in our rental income mistakes landlords make with MTD ITSA.
Stopping Your Only Qualifying Source
If the source being stopped is your only self-employment or property income, this is a genuine exit from MTD, not a partial change.
The steps are:
- Tell HMRC the date the income ceased through the HMRC online services account or agent services account
- Send the final quarterly update for the period that includes the cessation date
- Include the ceased income in the Self Assessment tax return for that tax year, submitted through MTD-compatible software
After the tax year in which the income ceased, MTD ITSA is no longer required, unless a new qualifying self-employment or property source starts, which brings you back in. Digital records still need to be kept for the period you were in MTD; the obligation to report ends, but the record-keeping requirement does not.
Does a Ceased Source Still Count Towards the Threshold?
Yes, in some circumstances. A ceased income source can still count towards your qualifying income if you have another qualifying source still going. These catches people out because it feels as though stopping should lower the figure HMRC uses.
HMRC's rule indicates that self-employment or property income which has ceased since your last tax return is still included in your qualifying income calculation, provided at least one other self-employment or property source continues.
Example.
| Self-employment income (2024/25) | £27,000, ongoing |
| Rental property income (2024/25) | £25,000, property later sold and income stopped |
| Qualifying income | £52,000 (both figures still count) |
| Result | Still within MTD ITSA, because self-employment continues |
Even though the rental income has stopped, it still counts towards qualifying income because there is another continuing source, namely self-employment. The £52,000 figure would no longer apply only if both sources had ceased.
The ceased source only drops out of the calculation once every self-employment and property source has ceased. In that case, HMRC needs to be told before the start of the next tax year. If they aren't told, MTD ITSA will still apply, regardless of whether any qualifying income remains.
Falling Below the Threshold: Why It Doesn't Mean an Immediate Exit
Falling below the qualifying-income threshold does not remove you from MTD ITSA straight away. You remain in MTD until your qualifying income has been below the relevant threshold for three consecutive tax years.
HMRC checks this using the fourth quarterly update of the third year. Once that confirms three consecutive years below the threshold, the option to opt out appears in your HMRC online services account, without waiting for that year's tax return to be filed.
Example. Someone joins MTD ITSA from April 2026 because their 2024/25 qualifying income was over £50,000. Their income then falls, and they want to know when they can leave.
To opt out, HMRC needs to see qualifying income below the relevant threshold for three tax years in a row. Because the threshold itself is being phased down over this period, from £50,000 to £30,000 and then to £20,000, each of those three years is checked against the threshold that applied in the respective year:
| Tax year being checked | Threshold that applies | Where the income figure comes from | Needs to be |
|---|---|---|---|
| 2027/28 | £30,000 | 2025/26 tax return | Below £30,000 |
| 2028/29 | £20,000 | 2026/27 tax return | Below £20,000 |
| 2029/30 | £20,000 | Fourth quarterly update for 2029/30, due 7 May 2030 | Below £20,000 |
Only once all three years are confirmed as below threshold does the option to opt out appear in the HMRC online services account. In this example, it means MTD ITSA would no longer be required from the 2030/31 tax year onwards.
If the option to opt out is taken up, any quarterly updates already sent for that final tax year are deleted, and a Self-Assessment return is submitted for it instead. You can also choose to stay in MTD voluntarily after you become eligible to leave.
Adding a New Self-Employment Source
A new self-employed business does not need to be reported through MTD immediately, even if you're already using MTD for other income. This works differently from what many taxpayers assume.
The new income is simply included in the ordinary Self-Assessment tax return for the year it started, filed through MTD-compatible software as normal, but without quarterly updates for that specific source in the first year. Digital record-keeping and quarterly updates for the new source begin from the start of the tax year following the one in which that return was filed.
Example. You are already in MTD for an existing sole trade, and you start a second, unrelated self-employed business on 1 July 2026. That new business's income is reported for the first time in your 2026/27 tax return, due by 31 January 2028. Digital records and quarterly updates for it then begin from 6 April 2028.
Reporting the new source through quarterly updates from the date it starts, rather than waiting out the delay, is available as an option in most compatible software, but it isn't required.
Adding Another Rental Property
The rule for an additional rental property is different from the rule for a new self-employment source, and the two are easy to confuse.
If you are already letting UK property and take on another UK let, this is not treated as a new income source. All UK rental properties form a single property business (foreign lettings form a separate business of their own). Because it is the same business rather than a new one, there is no delay: digital records for the new property's income and expenses are needed from the date rent starts, and it goes into the next quarterly update.
The delayed-reporting rule for new sources described above applies only where this is genuinely a first rental property, or a first self-employment source, rather than an addition to a business already running.
More information on managing multiple properties within MTD-compatible software is covered in our rental income mistakes landlords make with MTD ITSA.
Selling a Rental Property
Selling a property is not, on its own, an MTD event. What matters for MTD ITSA is whether the rental income from that property stops. The sale itself, and any capital gain arising from it, are dealt with separately from MTD quarterly reporting.
If the property sold was one of several let out, nothing changes for MTD purposes, as covered above under stopping one source among several.
If it was the only source of rental income, the rental income ceasing is what triggers the process set out earlier: HMRC is informed the date the income stopped, the final quarterly update covering that period is sent, and, if there's no other qualifying self-employment or property income, MTD ITSA ends after that year's tax return is filed. Where self-employment income continues, the ceased rental income still counts towards qualifying income going forward, in the same way as the earlier example.
What to Do Next
A change of circumstances under MTD ITSA rarely happens in isolation. A ceased source, a falling threshold, and a new business can all be under way at the same time, and getting the notification or the timing wrong can mean submitting updates that aren't needed, or missing ones that are.
If your circumstances have changed, or are about to, it is worth having your specific position checked rather than working from general guidance alone.
Doshi Accountants' Self Assessment tax return service handles MTD ITSA notifications, quarterly updates, and the annual return together, and property accounts service supports landlords managing single or multiple lettings through the same process.