What is Making Tax Digital for Income Tax?

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Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is a fundamental change to the way self-employed individuals and landlords report their income to HMRC — replacing the annual Self Assessment return with quarterly digital submissions. **Mandatory rollout timeline:** - **April 2026:** Self-employed and landlords with qualifying income above **£50,000**. - **April 2027:** Those with qualifying income above **£30,000**. - **TBC:** Those with qualifying income above **£20,000** (announced in principle). **What you must do under MTD ITSA:** 1. Use HMRC-compatible software to keep digital records. 2. Submit **4 quarterly updates** per year (July, October, January, April) summarising income and expenses. 3. Submit an **End of Period Statement** confirming the figures. 4. Submit a **Final Declaration** (replacing the SA return) by 31 January. **Compatible software:** FreeAgent, QuickBooks, Xero, Sage, and many others are HMRC-approved. Spreadsheet users can use bridging software to digitise records. **Penalties:** MTD ITSA uses a points-based penalty system — 1 point per missed quarterly submission, with a £200 financial penalty at 4 points (reset after a compliance period). **Exemptions:** Those with complex affairs (e.g. partnerships, trusts) and digitally excluded individuals may be exempt or deferred. HMRC has confirmed partnerships will be brought in from a later date. **Action needed now:** If your income exceeds £50,000 from self-employment or property, sign up for a compatible package, begin digital record-keeping, and check your tax agent is MTD-ready.

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