What is it
Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) is an HMRC initiative which aims to digitise the UK tax system. Under MTD for ITSA, certain individuals and businesses will be required to keep digital records and use software to submit details of their income and expenses to HMRC on a quarterly basis.
Who is likely to be affected
From April 2026, MTD for ITSA will affect self-employed individuals and landlords with combined annual business and/or property income exceeding £50,000 (gross). This will be assessed based on the figures reported in the 2024/25 tax return, which is due by 31 January 2026.
The threshold at which MTD for ITSA applies will be lowered to £30,000 from April 2027 and £20,000 from April 2028.
MTD for ITSA does not currently apply to partnerships, companies, trusts, estates, or those outside Self-Assessment. MTD for ITSA also does not apply to taxpayers who do not have a UK national insurance number and those who complete the residence, remittance basis etc pages of the Self-Assessment return will not be required to use MTD for ITSA until at least April 2027.
What is required and what needs to be reported
Taxpayers within MTD for ITSA will need to submit quarterly updates to HMRC summarising income and expenses. The information submitted to HMRC each quarter will represent the cumulative figures for the year to date, unlike quarterly VAT returns.
The information required in each quarterly update will align with the existing categories used in the full self-employment and property sections of the Self Assessment tax return (SA103F and SA105). However, businesses with annual turnover below the VAT threshold can use the simplified ‘three-line accounts’ format, reporting only income, expenses, and profit or loss on their Self Assessment tax return. These businesses will continue to have the option to submit quarterly updates using this simplified format.
A separate quarterly update will be required for each business a person operates. For example, an individual who is both a sole trader and the owner of a property business would need to submit a total of eight quarterly updates per year, four for each business.
There is no obligation to make tax or accounting adjustments as would be required in a full tax return, nor is there any expectation to do so. Quarterly updates do not require a taxpayer declaration, and penalties for inaccuracies do not apply.
Once the fourth quarterly update has been submitted, the year-end tax return can be prepared. At this stage, any tax and accounting adjustments can be made to align the quarterly update figures with the final tax year figures to be reported to HMRC.
When does it start
For individuals falling within the scope of MTD for ITSA from 6 April 2026, the reporting period and filing deadlines are as follows:
Businesses will be able to elect to report for calendar quarters e.g. 1 April to 30 June, but the deadlines for quarterly updates will continue to be 7 August, 7 November, 7 February and 7 May.
Digital record keeping requirements
Under MTD, digital records are required to be kept for each source of business or property income. The records must include:
- Date, amount, and category of each income and expense item.
- Digitally linked software components, ensuring data is transferred without manual copying or re-entry.
Users are required to keep records and submit updates using software that is compatible with Making Tax Digital (MTD).
While spreadsheets can still be used for record-keeping, they must be digitally linked to MTD-compliant software to enable submissions.
The exemption for individuals who are digital excluded will continue to apply in the same way that the exemption applies for MTD for VAT. This exemption applies to those who cannot use digital tools due to reasons such as age, disability, location, or religious beliefs. Exemptions may also be granted for other valid reasons on a case-by-case basis.