What is Making Tax Digital for Income Tax and when does it start?

Full answer

Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is HMRC's programme to digitise record-keeping and tax reporting for self-employed individuals and landlords. It is the most significant change to the Self Assessment system since its introduction in the 1990s. Rollout timetable -- April 2026: mandatory for self-employed individuals and landlords with total qualifying income over GBP 50,000 -- April 2027: threshold reduces to GBP 30,000 -- April 2028 (planned): threshold reduces to GBP 20,000 -- Partnerships: deferred, date to be confirmed -- Trusts and estates: deferred "Qualifying income" means combined income from self-employment and UK property before any deductions -- not profit. What MTD ITSA requires 1. Digital record-keeping: income and expenses must be recorded in HMRC-compatible software (spreadsheets with bridging software are acceptable). 2. Quarterly updates: submit a summary of income and expenses to HMRC four times a year (by 7 August, 7 November, 7 February, 7 May). These are not tax returns -- they are information submissions with no tax due at that point. 3. End of period statement (EOPS): an annual finalisation that confirms the figures and makes any adjustments. 4. Final Declaration: replaces the SA return; crystallises the tax liability for the year. Exemptions -- Individuals with no qualifying income (e.g., investment income only) -- Digitally excluded individuals (HMRC can grant exemption) -- Non-residents with no UK self-employment or property income -- Some other limited exemptions Penalty implications MTD introduces a new points-based penalty system for late submissions (separate from late payment penalties). Software HMRC maintains a list of MTD-compatible software on GOV.UK. Many mainstream accounting packages (QuickBooks, Xero, FreeAgent, Sage) are already MTD ITSA compatible.