Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) is HMRC’s programme to move self-employed workers and landlords from annual paper or online Self Assessment returns to quarterly digital reporting. From April 6, 2026, if your total gross income from self-employment and property exceeds £50,000, you must use HMRC-compatible software to keep digital records and send quarterly updates — replacing the traditional January 31 annual return process.
Quick answer: MTD for Income Tax is mandatory from April 2026 for self-employed individuals and landlords with gross income above £50,000. You must use approved software to keep digital records and submit four quarterly updates each year, plus an End of Period Statement and Final Declaration by January 31.
MTD for Income Tax: Mandatory Rollout Dates
| Date | Who Must Join |
|---|---|
| April 6, 2026 | Self-employed and landlords with gross income > £50,000 |
| April 6, 2027 | Self-employed and landlords with gross income > £30,000 |
| Future (TBC) | Possibly £20,000 threshold — subject to government confirmation |
Who counts: Total gross income from all self-employment businesses AND all UK rental income combined. PAYE employment income does not count.
Example: A sole trader with £35,000 business turnover and a rental property generating £20,000 gross rental income has total qualifying income of £55,000 and must join from April 2026.
What MTD for Income Tax Means in Practice
Under MTD for ITSA, the annual Self Assessment return is replaced by a new filing structure:
| Filing | When | What It Contains |
|---|---|---|
| Quarterly Update 1 | August 5 | Running income and expenses: April 6 – July 5 |
| Quarterly Update 2 | November 5 | Running income and expenses: July 6 – October 5 |
| Quarterly Update 3 | February 5 | Running income and expenses: October 6 – January 5 |
| Quarterly Update 4 | May 5 | Running income and expenses: January 6 – April 5 |
| End of Period Statement (EOPS) | January 31 | Final figures for the tax year, with any adjustments |
| Final Declaration | January 31 | Confirm total income including dividends, interest, other sources; replaces SA return |
Important: Quarterly updates are cumulative totals — running year-to-date figures of income and allowable expenses. They are not monthly accounts. You do not need to calculate tax with each quarterly update — that happens in the Final Declaration.
Digital Records You Must Keep
Under MTD for ITSA, you must keep the following records digitally (in your software, not in paper files or spreadsheets disconnected from HMRC):
Self-employment records:
- Gross income/receipts for each transaction
- Expenses by category (cost of goods, staff costs, premises, travel, advertising, professional fees, etc.)
- Date and amount of each transaction
Property records:
- Gross rental income from each property
- Allowable property expenses (repairs, agent fees, insurance, mortgage interest where applicable)
- Date of each income and expense
What you do NOT need to do: Scan and upload individual receipts to HMRC. Your software stores records digitally — you file summaries. Keep original receipts for 5 years in case of HMRC enquiry.
Compatible Software for MTD for Income Tax
HMRC requires software that:
- Keeps digital records of income and expenses
- Calculates and submits quarterly updates directly to HMRC via API
- Produces the End of Period Statement and Final Declaration
Widely approved products (April 2026):
| Software | Suitable For | Approx. Cost/Month |
|---|---|---|
| QuickBooks Self-Employed | Sole traders, freelancers | ~£12–£20 |
| Xero | Sole traders, landlords | ~£15–£42 |
| FreeAgent | Sole traders, small businesses | ~£19–£35 |
| Sage Accounting | Sole traders, small businesses | ~£15–£38 |
| Coconut | Freelancers, self-employed | ~£11 |
| IRIS KashFlow | SMEs | ~£10 |
Free and low-cost options: Some banking apps (Starling, Monzo Business) have MTD integrations. HMRC does not provide its own free MTD software for income tax (unlike its VAT filing portal).
Bridging software: If you currently use spreadsheets, you can use bridging software (which connects your spreadsheet to HMRC’s API). Products include Absolute Tax, TaxCalc, and others. This is typically a temporary solution — full MTD-compatible software is preferred.
What Happens If You Miss a Quarterly Update?
MTD for ITSA uses a points-based penalty system (same as MTD for VAT):
- Each missed or late submission earns 1 penalty point
- Once points reach a threshold (varies by submission frequency), HMRC issues a £200 penalty
- Points expire after 24 months of compliance
- HMRC can waive points in genuine exceptional circumstances (illness, disaster, bereavement)
For quarterly filers, the threshold is 4 points before the first £200 penalty applies. So you can miss up to 3 quarterly submissions before the first financial penalty — but points accumulate and reset slowly.
Voluntary Sign-Up Before April 2026
If your income is below £50,000, you can sign up for MTD for ITSA voluntarily via gov.uk. Early adoption allows you to:
- Familiarise yourself with the software before it is mandatory
- Potentially claim simplified expenses without complex records
- Spread the cost of software adoption over a longer period
How MTD for Income Tax Changes Tax Planning
Because you are submitting income and expense summaries quarterly, your accountant or bookkeeper can:
- Flag underpayments earlier in the year
- Suggest pension contributions or other deductions before year-end
- Reduce the January 31 shock of a large unexpected tax bill
HMRC intends to use the quarterly data to provide in-year tax estimates — showing you a running estimate of your likely tax bill so you can budget for the final payment.
Related UK Self-Employment and Tax Resources
- Self Assessment Tax Return Guide — deadlines, what to include, Payment on Account
- Self-Employed Tax Guide UK — income tax and National Insurance for sole traders
- VAT Guide UK 2026 — VAT registration, schemes, and MTD for VAT
- Capital Allowances Guide — deduct business equipment costs
- UK Taxes Hub — all UK tax guides for 2026
If you earn above £50,000 and are not yet using accounting software, April 2026 is the deadline. Choose your MTD-compatible software now — most have a 30-day free trial — and begin keeping digital records at the start of the 2026/27 tax year (April 6, 2026) to stay compliant from day one.
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