Making Tax Digital for Income Tax

What is Making Tax Digital for Income Tax?

MTD for ITSA is part of HMRC’s broader Making Tax Digital (MTD) initiative. It’s designed to modernise the tax system by requiring digital record-keeping and more frequent reporting.

Instead of filing one Self Assessment tax return a year, you’ll now send quarterly updates, an End of Period Statement (EOPS), and a Final Declaration using compatible software.

Who Will Be Affected?

MTD for ITSA will apply to:

• Self-employed individuals
• Landlords (including those with UK property income and foreign property income)
• Individuals with partnerships (future phase)
• Anyone with income from both self-employment and property

Income Thresholds:

• From 6 April 2026: If your total gross income from self-employment and/or property exceeds £50,000 per year.
• From April 2027: Threshold drops to £30,000 per year.

If your income is below £30,000, MTD for ITSA won’t apply for now, but this could change in the future.

Important: The £50,000 / £30,000 threshold is based on gross income, not profit.

What Will You Have to Do?

If you're within the scope of MTD for ITSA, you’ll be required to:

Keep Digital Records

• Maintain digital records of your income and expenses for each business or property.
• You can do this using HMRC-approved MTD software (see list here).

Send Quarterly Updates to HMRC

• Submit a summary of income and expenses every 3 months via your software.

  Deadlines:

  • Quarter 1: 6 April to 5 July → due by 5 August
  • Quarter 2: 6 July to 5 October → due by 5 November
  • Quarter 3: 6 October to 5 January → due by 5 February
  • Quarter 4: 6 January to 5 April → due by 5 May

Submit an End of Period Statement (EOPS)

• After the end of your accounting year, you’ll review the quarterly submissions and make any final adjustments.
• The EOPS confirms your final taxable profit for the year.

Submit a Final Declaration

• Also known as the “Crystallisation.”
• This is where you confirm your total income from all sources and claim any reliefs or adjustments.
• It replaces the current Self Assessment tax return.

What Kind of Software Will You Need?

You’ll need to use HMRC-recognised software that can:

• Keep and store digital records
• Submit quarterly updates
• Send the EOPS and Final Declaration

Examples include: Xero, QuickBooks, FreeAgent, Sage, and many others.

Some software is free, but others charge a monthly subscription—check which one suits your needs and budget.

Special Cases and Exemptions

You may be able to claim an exemption from MTD for reasons such as:

• Digital exclusion: due to age, disability, or lack of internet access
• Religious grounds: if your beliefs prevent the use of digital tools

You must apply to HMRC directly for this exemption.

When Should You Start Preparing?

Although MTD for ITSA won’t be mandatory until April 2026, we recommend preparing early by:

✅ Reviewing your current record-keeping process

✅ Exploring suitable MTD-compatible software

✅ Practicing digital record-keeping now

✅ Asking us for help to get set up and ready

Can You Join Early?

Yes! HMRC is running a voluntary pilot scheme, and some businesses are already using MTD software for quarterly updates. Early adoption gives you more time to get comfortable with the process.

Let us know if you’re interested in joining the pilot.

Summary of Key Dates