Guide · Personal Tax
UK Making Tax Digital for Income Tax Self Assessment (MTD ITSA) Explained
Making Tax Digital for Income Tax Self Assessment — usually shortened to MTD ITSA — is the biggest change to UK personal tax administration in a generation. From 6 April 2026, self-employed people and landlords whose combined gross income exceeded £50,000 in the qualifying tax year must keep their records digitally, send HMRC quarterly updates of income and expenses, and submit a year-end Final Declaration in place of the familiar annual SA100 return. From 6 April 2027 the threshold drops to £30,000, with a further drop to roughly £20,000 expected in 2028 and partnerships included thereafter. The payment dates do not change — 31 January remains the balancing-payment deadline — but everything before that point becomes a running, software-based conversation with HMRC instead of one annual paper exercise. This guide walks through who is in scope, the precise deadlines, the software requirement, a worked example, penalties and the common preparation mistakes.
- From 6 April 2026: MTD ITSA mandatory if gross self-employment + property income > £50,000.
- From 6 April 2027: threshold drops to > £30,000.
- 4 quarterly updates per business + 1 Final Declaration each year.
- Quarter deadlines: 7 Aug, 7 Nov, 7 Feb, 7 May. Final Declaration by 31 January.
- Payment dates unchanged: 31 Jan balancing + 31 Jul payment on account.
- HMRC-recognised software required; digital records from origin.
What MTD ITSA actually is
MTD ITSA is a complete overhaul of how self-employed taxpayers and landlords communicate their income and expenses to HMRC. Today, an in-scope sole trader keeps records however they like (often a shoebox of receipts plus a spreadsheet), then once a year between 6 April and the following 31 January, fills out an SA100 tax return with summary totals. Under MTD ITSA the workflow becomes continuous: transactions are recorded digitally as they happen in HMRC-recognised software, cumulative totals are pushed to HMRC every three months via an API, and a single Final Declaration at the year-end ties everything together with capital allowances, accruals, basis-period adjustments and personal allowances.
The change is administrative, not a tax rise. The same trading profits feed into the same income tax and Class 4 NIC calculation. The same payment dates apply. What HMRC gains is a near-real-time view of self-employed and rental income — which they hope will improve compliance and reduce the "tax gap". What in-scope taxpayers face is a software requirement and a discipline of recording transactions digitally as they occur, rather than catching up after year-end.
Phase-in timeline
| Start date | Gross income threshold | Who is brought in |
|---|---|---|
| 6 April 2026 | > £50,000 | Self-employed individuals and landlords (largest first wave — roughly 780,000 taxpayers). |
| 6 April 2027 | > £30,000 | Second wave (roughly a further 970,000 taxpayers). |
| 6 April 2028 (proposed) | ~ £20,000 | Third wave plus partnerships (timing under review at the Autumn Budget). |
The qualifying year that decides whether you are in scope for a given start date is the secondtax year before commencement. So for the 6 April 2026 start the qualifying year is 2024/25 — meaning the income you reported on the SA100 filed by 31 January 2026 determines whether you must use MTD from 6 April 2026. HMRC writes to in-scope taxpayers before each wave.
Who is in scope
You will be in scope from 6 April 2026 if all the following are true:
- You are a UK-resident individual (not a company, partnership or trust).
- You have income from self-employment, a property business, or both.
- Your combined gross income from those sources in 2024/25 exceeded £50,000.
Important nuances:
- Gross, not net: turnover before expenses for self-employment, gross rents before allowable deductions for property.
- Multiple businesses: if you have two trades, the gross income of each is added together for the threshold test. Once in scope, you submit separate quarterly updates for each business.
- Property + self-employment combined: the two are added for the threshold test.
- Joint property: each owner reports their own share. Spouses with a joint BTL of £120,000 gross have £60,000 each — both individually in scope.
- Furnished holiday lettings: count as property income for the test (the FHL regime itself was abolished from April 2025 but the receipts still feed into MTD).
Who is out of scope
You do not need to use MTD ITSA — at least not yet — if you are:
- Employed only, paid through PAYE.
- An individual with only dividend, savings or capital-gain income.
- Receiving only foreign income (and have no UK self-employment or UK property).
- A partnership — deferred until at least April 2028, with regulations still to be made.
- A trustee (other than of registered pension schemes), executor or personal representative.
- A foster carer, shared-lives carer or kinship carer using the qualifying-care relief — deferred indefinitely.
- A minister of religion.
- A non-resident company with UK property income (these stay on existing returns).
- A charity or unincorporated charitable trust.
- Granted an individual digital exemption by HMRC (age, disability, no broadband, religious belief).
The four quarterly windows
HMRC uses fixed standard quarters tied to the tax year, not your accounting period. Each update is a cumulative figure of income and expenses from 6 April to the period end — so by Q4 the figures you submit cover the whole year.
| Quarter | Period covered | Submission deadline |
|---|---|---|
| Q1 | 6 April – 5 July | 7 August |
| Q2 | 6 July – 5 October | 7 November |
| Q3 | 6 October – 5 January | 7 February |
| Q4 | 6 January – 5 April | 7 May |
| Final Declaration | Whole tax year + other income | 31 January following the tax year |
You may elect to use calendar quarters instead — 30 June, 30 September, 31 December and 31 March — which aligns better with VAT quarters. The election is made in your software, with the same one-month-and-two-day filing window after each quarter end.
The software requirement
HMRC will only accept MTD submissions through software it has certified as MTD-recognised. The list includes most mainstream UK accounting products plus a growing field of MTD-specific tools:
- Full accounting platforms: FreeAgent, QuickBooks Online, Xero, Sage Accounting, FreshBooks.
- MTD-focused products: 123 Sheets, Coconut, Hammock (landlords), Untied, APARI.
- Spreadsheet + bridging: Excel or Google Sheets is allowed if combined with bridging software that creates a digital link to the HMRC API. Re-keying totals is not acceptable.
The digital-record rule is strict. From the moment a transaction enters your records it must be in a digital form, and there must be a digital link (not a manual re-entry) all the way through to the submission. In practice that means a bank feed or a digitised receipt becomes the starting point — not a handwritten cash book later transcribed into a spreadsheet. HMRC has been clear that an Excel file you fill in manually still counts as digital records, but the link to HMRC must be automatic.
Worked example — Lisa, sole trader graphic designer
Lisa runs a freelance graphic design business. Her 2024/25 SA100 showed turnover of £55,000, so she is in scope from 6 April 2026. She has chosen FreeAgent and signed up via gov.uk in March 2026.
Tax year 2026/27 — quarterly updates
Q1 (6 Apr – 5 Jul 2026): income £14,000, expenses £3,000. Submitted via FreeAgent on 4 August 2026 — deadline 7 August.
Q2 (6 Jul – 5 Oct 2026): cumulative income £27,500, cumulative expenses £6,400. Submitted 2 November 2026.
Q3 (6 Oct 2026 – 5 Jan 2027): cumulative income £41,000, cumulative expenses £9,600. Submitted 31 January 2027.
Q4 (6 Jan – 5 Apr 2027): cumulative income £56,200, cumulative expenses £13,000. Submitted 1 May 2027.
Final Declaration — due 31 January 2028
In her Final Declaration Lisa applies year-end adjustments her quarterly updates did not capture: a £4,500 AIA claim on a new iMac, a £400 use-of-home deduction, an accrual for her December accountancy bill paid in February, and her personal allowance against total income (also including a small amount of bank interest). The final tax bill is then a normal SA computation — only the route to it has changed.
Lisa's payment dates are unchanged from the old SA regime. She pays the 2026/27 balancing payment plus the first 2027/28 payment on account by 31 January 2028, and the second payment on account by 31 July 2028.
How to prepare for MTD ITSA — 5 steps
- Check if you are in scope. Add gross self-employment and gross rental income for the qualifying tax year. Above £50,000 = in scope from 6 April 2026; £30,001 – £50,000 = in scope from 6 April 2027.
- Choose MTD-compatible software.Pick from HMRC's recognised list. Trial it against your real transactions for a quarter before MTD becomes mandatory.
- Sign up via gov.uk before the tax year starts. Use your Government Gateway credentials, sign up for MTD ITSA, link the software. Doing this in March means you are ready on 6 April.
- Set up digital records. Connect bank feeds, enable receipt scanning, separate personal and business accounts, configure expense categories that map cleanly to the SA103/SA105 boxes.
- Submit Q1 by August. The first deadline is 7 August 2026 for the period 6 April – 5 July 2026. Treat the first Final Declaration in January 2028 as a deliberate dress rehearsal — work through capital allowances and basis-period adjustments well before the deadline.
Penalties — the new points system
MTD ITSA arrives with HMRC's reformed penalty regime, already used for VAT MTD. There are two independent systems running side by side.
Late submission — points-based
- Each missed quarterly update earns 1 point.
- Reaching the threshold of 4 points (roughly one full year of misses) triggers a £200 fixed penalty.
- Every further missed submission while at the threshold is another £200.
- Points reset after 24 months of complete on-time compliance.
- The Final Declaration also counts within the points regime.
Late payment — interest plus surcharges
- 1–15 days late: no penalty if paid (but interest accrues).
- 16–30 days late: 2% of the outstanding amount.
- 31+ days late: 4% calculated to day 30, plus a further 4% annualised daily rate from day 31 onwards.
- HMRC interest on the unpaid tax accrues throughout at base rate + 2.5%.
Joint property income
Joint ownership is the area that catches couples off guard. HMRC treats each owner as having their own property business, reported through their own MTD return. So a husband-and-wife buy-to-let with £120,000 of gross rent split 50/50 gives each spouse £60,000 of gross income — both above £50,000 and both in scope from April 2026, even if one spouse is otherwise employed.
Unequal beneficial ownership (declared via Form 17 for spouses, or via the deed for unmarried co-owners) determines the split. Each owner needs their own MTD-recognised software, their own Government Gateway sign-up and their own quarterly updates. Coordinating data entry — typically one spouse runs both sides of the property records and the other simply confirms and submits — is the common practical solution.
Common preparation mistakes
- Leaving software choice to the last quarter. Migrating mid-year forces you to enter the year-to-date from another system, often introducing reconciliation errors. Pick your software at least three months before commencement.
- Mixing personal and business expenses in the same digital account. The MTD audit trail expects a clean separation. Open a dedicated business bank account before April 2026.
- Ignoring Class 4 NIC implications. Quarterly updates only reflect income tax and basic profit. The Final Declaration is where Class 4 NIC, payments on account and the marriage allowance interact — leave time to model it.
- Double-reporting expenses already claimed via simplified flat-rate expenses. If you use the £6/week home-working flat rate or the simplified vehicle mileage rate, you cannot also claim the actual costs in your quarterly figures.
- Forgetting to file the Final Declaration. Quarterly compliance does not on its own fulfil the year-end requirement — the Final Declaration is a separate, additional submission. Missing it is a points event AND blocks finalisation of your tax position.
- Submitting last year's SA100 in April 2026 then assuming MTD does not apply. The SA100 for 2025/26 is still due by 31 January 2027; MTD kicks in from 6 April 2026 onwards for the 2026/27 year. They overlap by 10 months.
What stays the same
For all the new mechanics, the underlying tax stays exactly as it is. The personal allowance, basic and higher-rate bands, Class 2 and Class 4 NIC structure, capital allowances and AIA, the property allowance, rent-a-room relief, payments on account on 31 January and 31 July, the marriage allowance, the £1,000 trading allowance — none of this changes. MTD ITSA is about HOW you report, not WHAT you pay. Even the SA103, SA105 and other supplementary pages map straightforwardly to the categorisation HMRC expects within the quarterly update.
Official references
- gov.uk: "Making Tax Digital for Income Tax" guidance hub — sign-up, software list, exemptions.
- HMRC manual MTDM: the technical manual setting out scope, qualifying income, quarterly periods and the digital-record rule.
- HMRC Software Choices for MTD ITSA: regularly updated list of recognised products.
- Schedule A1 Finance Act 2017 (as amended): the statutory basis for digital reporting.
- The Income Tax (Digital Requirements) Regulations 2021 (as amended): operational rules, quarterly windows, electronic communication.
Bringing it together
MTD ITSA is not a new tax. It is a new operating model for an existing tax — one that demands you think about your books continuously rather than annually. The administrative burden is real, but for most well-organised sole traders and landlords the additional time per quarter is modest once the software is configured. The real cost is for those who run a business out of a shoebox and a January scramble — that model is no longer compatible with how HMRC will run Self Assessment from 6 April 2026. Choose your software early, get your bank feeds clean, separate personal and business spending, and treat the first Final Declaration in January 2028 as the moment your old SA100 habits finally retire.