Making Tax Digital for Income Tax UK 2026: Who Is Affected and When

Making Tax Digital for Income Tax Self Assessment (MTD ITSA) has arrived. From April 2026, self-employed people and landlords with qualifying income above GBP 50,000 must keep digital records and submit quarterly updates to HMRC through compatible software. The annual Self Assessment return as most people know it is being phased out and replaced with a new End of Period Statement and Final Declaration process. Here is everything you need to know.

The Rollout Schedule

HMRC is introducing MTD ITSA in waves based on income level:

• From April 2026: Self-employed and landlords with qualifying income over GBP 50,000 are mandated
• From April 2027: The threshold drops to GBP 30,000 qualifying income
• From April 2028: The threshold drops further to GBP 20,000 qualifying income

Qualifying income means the combined gross income from self-employment and/or property. It is the gross figure before expenses, not the taxable profit.

If you are already in the first wave (over GBP 50,000 qualifying income), you must have enrolled and be using compatible software from 6 April 2026.

What Changes in Practice

Under the old Self Assessment system, you had one filing per year -- your SA100, due by 31 January following the tax year end. Under MTD ITSA, the filing calendar becomes:

Quarterly updates: You submit four updates per year to HMRC, summarising your income and expenditure for each quarter. The standard quarters run to 5 July, 5 October, 5 January, and 5 April. You can elect for calendar quarters (ending 30 June, 30 September, 31 December, 31 March) if that suits your accounting better.

The quarterly updates do not have to be exact or final -- they are more like regular data feeds to HMRC. However, they must be submitted within one month of each quarter end, so the quarterly deadlines are approximately 5 August, 5 November, 5 February, and 5 May.

End of Period Statement (EOPS): After the tax year ends, you finalise your income and expenses in an EOPS, applying any adjustments, reliefs, or allowances. This replaces what was effectively the annual SA return detail for that income source.

Final Declaration: Once all income sources (employment, savings, dividends, pensions as well as self-employment and property) have been accounted for, you submit a Final Declaration (replacing the SA return). The deadline for the Final Declaration is 31 January, same as the old SA filing deadline.

What Software Do You Need?

You must use HMRC-recognised MTD-compatible software. HMRC does not provide its own free software for MTD ITSA (unlike MTD for VAT where a free option existed for some). Options include:

• Accounting packages: Xero, QuickBooks, Sage, FreeAgent
• Bridging software for those who maintain records in spreadsheets and use software to submit the updates
• Dedicated sole trader apps

Check HMRC's official software list (gov.uk) as it is regularly updated. Free or low-cost options are available, particularly for sole traders with simple affairs.

Digital Record-Keeping Requirements

Under MTD ITSA, you must maintain digital records of:

• Business income (each receipt recorded digitally)
• Business expenses (categorised)
• Property income and expenses (if you are a landlord)

You are not required to scan every receipt, but the transaction data must be held digitally in a compatible system. Cash transactions must be recorded digitally too -- you cannot maintain a paper cash book and transfer monthly totals.

Who Is Exempt?

HMRC has confirmed exemptions for certain taxpayers:

• Those whose qualifying income is below the current threshold (GBP 50,000 in 2026/27)
• Those in a religious society whose beliefs conflict with digital technology
• Those for whom HMRC has agreed it is not reasonably practicable to comply due to age, disability, remoteness, or other factors

Partners in trading partnerships have their own timeline (as yet not finalised for the partnership-level filing).

Penalties Under MTD ITSA

HMRC is introducing a new points-based penalty system alongside MTD ITSA:

• Each late submission earns one penalty point
• Once you accumulate a threshold number of points, a GBP 200 penalty is triggered
• The threshold is four points for quarterly filers
• Points expire after a period of good compliance

This replaces the current flat late-filing penalties for Self Assessment. Late payment interest continues to apply on any tax paid after the 31 January deadline.

What to Do Now If You Are in the First Wave

If your qualifying income exceeded GBP 50,000 in 2024/25 (the reference year HMRC uses to determine the 2026/27 mandate), you should have received a notice from HMRC. Steps to take:

1. Confirm which software you will use and ensure it is MTD-compatible
2. Migrate your records into the software (or set up bridging if you use spreadsheets)
3. Register for MTD ITSA via HMRC's government gateway if not already done
4. Understand your quarterly deadlines for the 2026/27 tax year
5. Speak to your accountant -- the EOPS and Final Declaration processes may still require professional support even if you submit quarterly updates yourself

Landlords: Specific Considerations

If you are a landlord with multiple properties, each property's income and expenses should be tracked. HMRC expects the quarterly updates to reflect all UK property income on a combined basis, but you need the individual property data to support the EOPS. If you manage properties through a letting agent, check whether they provide MTD-compatible data exports.

Use the CalcHub self-employed tax calculator to estimate your income tax and NI liability under the MTD ITSA framework for 2026/27.