Making Tax Digital for Income Tax Self Assessment (MTD for ITSA)

1. Overview

Making Tax Digital for Income Tax (often called “MTD for ITSA”) is HMRC’s move to require sole traders and landlords to keep digital records and send regular updates to HMRC using compatible software. Instead of preparing everything once a year, you’ll send four quarterly updates during the tax year, then submit an end-of-year final declaration to confirm your taxable profit and other income.

MTD changes how you keep records and report; it does not (in general) change the underlying tax rules. Income tax is still calculated on the same basis, and payment deadlines broadly remain aligned to the existing Self Assessment timetable (for example, the main balancing payment is still due by 31 January after the end of the tax year).

2. Who needs to comply (and when)

MTD for Income Tax applies (in the first phase) to individuals who are in Self Assessment and have qualifying income from:

• self-employment (sole trader)
• UK property income (landlords)
• foreign property income (where relevant)

Your start date is based on your combined gross income (turnover) from self-employment and property, before expenses. Other sources of income (for example, employment PAYE income) do not count towards the turnover thresholds, although they are still included in your overall tax position.

HMRC works out whether you’re in scope by looking at the figures on your most recent tax return. Even if you receive a letter, you generally still need to sign up to start using the new service (it is not typically automatic).

3. What you must do under MTD for Income Tax

3.1 Keep digital records

You (or your agent/bookkeeper) must keep business records digitally. This normally means recording income and expenses in accounting software or a spreadsheet-based system (with an appropriate way to submit to HMRC). You should still keep your supporting evidence (for example, invoices and receipts) in a way that lets you substantiate the figures if asked.

3.2 Send four quarterly updates

Every 3 months, your compatible software produces a summary of your income and expenses by category and submits it to HMRC as a quarterly update. Quarterly updates are typically unadjusted (you do not usually need to make tax or accounting adjustments before sending them). If you have multiple businesses or both self-employment and property income, you send updates for each relevant income source. If there was no activity in a quarter, you still submit an update to confirm that.

3.3 Submit the end-of-year final declaration

After the tax year ends (5 April), you’ll finalise your position and submit a final declaration through your software. This is where you typically make any required adjustments (for example, capital allowances), confirm that all income sources have been included, and apply reliefs. The final declaration deadline remains aligned with the current Self Assessment filing deadline of 31 January after the end of the tax year.

4. Key dates and deadlines (standard quarterly periods)

The standard quarterly update periods follow the tax year (6 April to 5 April). Each quarterly update is due by the 7th of the month after the period end.

5. Software and record-keeping options

To comply, you need software that can keep digital records, send quarterly updates, and submit the final declaration.

Before choosing software, check it supports your income types (self-employment, UK property, foreign property) and fits your workflow (for example, how you invoice customers, capture receipts, or manage multiple properties). HMRC publishes an official list of software that works with MTD for Income Tax; always confirm features with the provider.

We recommend Xero and Hammock – for more information book in a call with Hannah:

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6. How Chatfield Accountancy can help you navigate these changes

Whether you want to do everything yourself with the right software in place, or fully outsource your bookkeeping and submissions, we offer three clear MTD product packs to match the level of support you need:

• Bronze – you maintain your own digital records and make your own quarterly MTD submissions.
• Silver – review before submission: you maintain your digital records and we review them before you make your quarterly MTD submissions.
• Gold – full service: we provide full bookkeeping and handle the quarterly MTD submissions for you.

All packs include: preparation of your accounts and submission of your Self Assessment tax return.

7. Penalties and exemptions (high level)

MTD for Income Tax uses a points-based approach to late submissions and separate late payment rules. HMRC guidance sets out when points are added and when a financial penalty is charged.

For taxpayers mandated from 6 April 2026, HMRC has indicated a “soft landing” for the first tax year (2026/27) where penalty points are not applied for late quarterly updates. This does not remove the need to submit, and penalties can still apply for missing the final declaration or paying late.

• Below the threshold: if your qualifying income is below the relevant threshold, you are not mandated (you continue with Self Assessment as normal).
• Partnerships and limited companies: these are not in the first phase of MTD for Income Tax (individual partners may still be in scope if they also have sole trader or property income personally).
• Digital exclusion and other exemptions: if it is not reasonably practicable for you to use digital tools (for example, due to disability, age, location, or certain religious beliefs), you may be able to apply to HMRC for an exemption.

8. Practical checklist to get ready

• Work out if you’re in scope: estimate your combined gross income from self-employment and property based on your latest tax return figures.
• Decide who will do the work: you, a bookkeeper, or your accountant.
• Choose compatible software and set it up (bank feeds, invoicing, expense categories, users, permissions).
• Put a routine in place: weekly or monthly bookkeeping, plus a quarterly review before submission.
• Keep records tidy: separate personal and business transactions where possible; keep notes for unusual items.
• Plan for year-end adjustments: for example, capital allowances, private use adjustments, and claims/reliefs.
• Diary the deadlines: 7 Aug / 7 Nov / 7 Feb / 7 May, plus 31 Jan for the final declaration.

10. Glossary (quick definitions)

• Qualifying income: your combined gross income (turnover) from self-employment and property (before expenses).
• Digital records: income and expense records kept in software/spreadsheets in an electronic form.
• Quarterly update: a 3‑monthly submission to HMRC summarising income and expenses by category.
• Final declaration: the end‑of‑year submission that finalises your taxable profit and overall Income Tax position (due 31 January after the tax year ends).

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