What is Making Tax Digital for Income Tax (MTD ITSA) in the UK?

Full answer

Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is HMRC's programme to digitise income tax reporting for the self-employed and landlords. **Who is affected from April 2026?** Sole traders and landlords with total gross income above £30,000 per year must comply from 6 April 2026. Those with income between £20,000 and £30,000 join from 6 April 2027. Partnerships and those below £20,000 have no confirmed mandate date yet. **What changes?** Instead of one annual Self Assessment return, you submit four quarterly updates to HMRC — by 7 August, 7 November, 7 February, and 7 May — covering your income and expenses for each quarter. A final End of Period Statement (EOPS) and a Final Declaration (replacing the SA return) are then submitted after the tax year ends. **Digital records requirement** You must use HMRC-recognised software (or bridging software) to record every business transaction digitally. Spreadsheets alone are not sufficient unless linked to compatible software. **Exemptions** HMRC may grant exemptions on grounds of age, disability, religious objection, or lack of internet access. Those with income below the threshold, those already in a partnership, or those subject to insolvency proceedings are also excluded from the initial rollout. **Penalties** A new points-based penalty system applies from April 2026: each missed quarterly submission earns one point; four points triggers a £200 penalty. Further £200 penalties apply for each subsequent failure. **Worked example** A freelance consultant earning £45,000 and a property investor earning £18,000 from rentals have combined income of £63,000 — both income streams count, so they are in scope from April 2026 and must use MTD-compatible software from that date.

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