Let’s Break This Down Together...
Big changes are coming to Self Assessment for the self-employed and landlords. From 2026, you'll need to go digital with your tax records and quarterly updates.
This article walks you through who needs to comply, what records to keep, and how to prepare for Making Tax Digital for Income Tax. It also covers deadlines, exemptions, and the right software to use.
By reading this, you'll feel more confident about what MTD means for you and how to stay on top of it all. Let’s dive in!
The Biggest Change to UK Tax in Generations
Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) represents the most significant change to the UK’s tax system in decades. Originally planned for 2024, HMRC has pushed implementation back to 2026 to ensure a smoother rollout.
This change will require self-employed individuals and landlords to use compatible software for keeping records and submitting quarterly updates. It is important to use approved software that meets HMRC’s requirements, and there is a wide range of software products available both free and paid to support MTD compliance for different business needs. The annual tax return will be replaced with more frequent digital submissions.
Understanding when you’ll need to comply, what software to use, and how to prepare is crucial if you currently file Self Assessment returns.
Pie tax, the UK’s first personal tax app, already features MTD-compatible real-time calculations. Or if you’re just here to get to grips with it all, let’s break it down!
Why HMRC Is Going Digital And What It Means for You
Making Tax Digital for Income Tax is a cornerstone of the UK government’s drive to modernise the tax system for the digital age. The main goal is to make tax administration more efficient, accurate, and user-friendly for everyone, especially self employed individuals and landlords.
By moving away from paper-based processes and requiring taxpayers to maintain digital records, the government aims to reduce errors and make it easier for people to get their income tax right the first time.
Under this policy, businesses and landlords will need to use digital tools to keep track of their income and expenses, and submit quarterly updates to HMRC. This approach not only streamlines the process but also gives taxpayers a clearer, more up-to-date view of their tax position throughout the year.
What exactly is MTD for ITSA?
MTD for ITSA is HMRC’s initiative to modernise the tax system by making it fully digital. It aims to make tax administration more effective while helping taxpayers get their tax right the first time.
Instead of completing an annual Self Assessment tax return, you’ll use MTD-compatible software to keep digital records. All records, including individual transactions and details from relevant income sources, must be stored digitally to comply with MTD requirements. You’ll send quarterly updates to HMRC throughout the tax year.
The system will initially apply to self-employed people and landlords with annual business or property income above £50,000 from April 2026. MTD for ITSA applies based on qualifying income, specifically the total qualifying income from income sources such as trading and property. Those with income between £30,000 and £50,000 will join from April 2027.
This digital approach will give you a clearer picture of your tax position throughout the year. You’ll no longer need to wait until year-end to understand your tax situation.
Who needs to comply with MTD for ITSA?
You’ll need to follow MTD for ITSA rules if you’re self-employed with business income above a certain threshold. This means £50,000 from April 2026, or £30,000 from April 2027.
Sole traders are required to comply and must submit quarterly updates for each of their trades or businesses, including property income. Landlords with property income above these thresholds will also need to comply. The same applies to those with combined business and property income exceeding the threshold.
If you exceed the threshold for the first time, you must comply with MTD for ITSA from the third tax year after exceeding it.
Partnerships will join the scheme later, with general partnerships having income over £50,000 starting in April 2028. Limited companies aren’t affected by MTD for ITSA as they already use MTD for VAT.
If your income is below £30,000, you won’t need to use the system. You can still join voluntarily if you wish to embrace digital record-keeping early. Non resident companies are generally exempt from MTD for ITSA.
MTD Rollout: When Does It All Kick In?
The MTD for ITSA timeline has been revised several times, but the current schedule is now fixed. April 2026 marks the start for businesses and landlords with income over £50,000. The relevant tax years determine when you must comply, as your income and turnover in specific tax years affect your inclusion and deadlines for MTD.
Those with income between £30,000-£50,000 will join in April 2027. General partnerships with income above £50,000 begin using the system from April 2028.
Once in the system, you’ll need to submit updates to HMRC after each quarter. This quarterly reporting process requires you to submit quarterly reports, which must be submitted quarterly within one month after each quarter ends. You’ll also complete an end of period statement and final declaration annually.
Until your mandatory start date, you’ll continue using the traditional Self Assessment system. This gives you time to prepare and adjust your record-keeping practices.
Going Digital: What Records You’ll Need to Keep
Under MTD for ITSA, you must keep records of income and expenses digitally. You’ll need to use MTD-compatible software for this purpose. Your software must connect to HMRC's systems to enable digital submissions.
Digital links must exist between all parts of your record-keeping system. Your submissions will go directly from your software to HMRC. There are various tax digital software options available, including free software products developed by the software industry in collaboration with HMRC to help small businesses and straightforward taxpayers comply with MTD requirements.
You can still use spreadsheets if they’re connected to HMRC via bridging software. Paper receipts remain valid, but their information needs transferring to your digital records. Adapting to digital record-keeping may introduce administrative burdens for some businesses, such as additional compliance steps and ongoing costs.
When I first heard about these requirements, I worried about scanning hundreds of receipts. Thankfully, you won’t need to scan every receipt – just record the details digitally in your chosen software.
Quarterly Updates: What You’ll Need to Submit
With the introduction of MTD for Income Tax, you’ll need to submit quarterly updates to HMRC using approved, MTD-compatible software. Each update will include a summary of your income and expenses for every business or property income source you have, organised in a way that’s similar to the current self assessment tax return.
These quarterly updates are designed to keep your tax position accurate and up-to-date throughout the tax year, helping you avoid surprises and stay compliant with income tax rules.
For each tax year, you’ll need to submit your updates by the deadlines set for the tax year quarters: 7 August, 7 November, 7 February, and 7 May. It’s important to ensure your digital record keeping is thorough and that you use compatible software to submit your information.
This not only helps you meet HMRC’s requirements but also makes it easier to track your property income, business expenses, and overall tax return data.
Final Declaration: End-of-Year Process
After you’ve submitted your four quarterly updates for the tax year, the next step is the Final Declaration. This is a crucial part of the MTD for Income Tax process, as it replaces the traditional self assessment tax return. The Final Declaration is where you review all your income and expenses for the year, make any necessary accounting adjustments, and confirm your final tax position with HMRC.
You’ll need to use MTD-compatible accounting software or bridging software to submit your Final Declaration, ensuring all your digital records are accurate and complete.
The deadline for this submission is 31 January following the end of the tax year, just like the current self assessment system. Getting your Final Declaration right is essential for self employed individuals and landlords, as it determines your final tax liability and helps avoid any delays or penalties.
How to prepare for MTD for ITSA
While 2026 might seem distant, starting preparations now will make the transition smoother. Research MTD-compatible software options that suit your business needs. Using prewritten templates and digital tools can help save time when communicating with clients about MTD. The software industry is working closely with HMRC to provide solutions for all taxpayers.
Review your current record-keeping methods and identify necessary changes. Speak with your accountant about their plans for supporting MTD clients.
Consider the costs of new software and any training you might need. Many software providers offer free trials, so you can test different options before committing. Free software products are available for those with straightforward affairs, making compliance more accessible for individuals with simple tax situations.
Some basic MTD-compatible software packages start from as little as £5 per month. If you’re comfortable with the idea, consider joining the MTD for ITSA pilot scheme to get ahead.
Pie tax: Simplifying MTD for ITSA Tax
Switching to MTD doesn't have to be stressful with the right support in place. Pie tax is fully MTD-compatible, so you can get comfortable with digital tax management well before the 2026 deadline.
Our app automatically categorises transactions and calculates your tax in real-time. This gives you the clear financial picture that MTD aims to provide throughout the year.
We handle multiple income streams simultaneously, perfect if you have both self-employment and property income. The app connects directly with HMRC, making you ready for quarterly submissions with minimal fuss.
You can see exactly what you owe at any time, helping you budget for tax payments throughout the year. Why not take a look at the Pie tax app to see how it could help with your MTD preparation?
