1. What is MTD for ITSA?
Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) is a new system introduced by HM Revenue & Customs that requires self-employed individuals and landlords to:
- Keep digital records of income and expenses
Income and expenses must be recorded digitally using MTD-compatible software.
- Submit quarterly updates to HMRC
Income and expense summaries must be submitted four times per year to report business activity during the tax year.
- Submit an annual final declaration
At the end of the tax year, individuals must submit a final declaration confirming total income and the final tax liability. This includes any year-end adjustments (such as capital allowances or disallowable expenses) through the End of Period Statement (EOPS). The deadline remains 31 January following the end of the tax year.
The aim is to move away from one annual tax return and instead provide regular digital reporting throughout the year.
Quarterly Updates
Under Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA), individuals must submit four quarterly updates to HMRC each tax year using MTD-compatible software.
These updates provide HMRC with a summary of the business income and expenses recorded during the quarter. The updates are based on the digital records maintained throughout the year.
Each quarterly update typically includes:
- Total business income received during the period
- Total allowable business expenses, usually grouped into expense categories
- A summary of the digital records maintained for the business
Quarterly updates do not finalise the tax position. They simply provide HMRC with a periodic summary of the taxpayer’s records during the year. It is then via the end of year submission which the tax position is finalised, with any tax due at this point too.
Quarterly Submission Deadlines
Quarterly updates must be submitted on time to avoid penalties, the standard quarterly periods are:
| Quarter | Period Covered | Submission Deadline |
| Q1 | 6 April – 5 July | 7 August |
| Q2 | 6 July – 5 October | 7 November |
| Q3 | 6 October – 5 January | 7 February |
| Q4 | 6 January – 5 April | 7 May |
Note: You can elect to report for calendar quarters (e.g., 1 April to 30 June), but the submission deadlines remain the same.
2. When Does MTD for ITSA Start?
| Tax Year | Gross Self-Employment + Property Turnover | MTD Start |
| 2024/25 | £50,000 | Join MTD from April 2026 |
| 2025/26 | £30,000 | Join MTD from April 2027 |
| 2026/27 | £20,000 | Join MTD from April 2028 |
This is based on the turnover submitted on the self-assessment tax return of the year mentioned. i.e. if your turnover exceeded £50,000 in your 2024/25 tax return, you will have to register for MTD from 06/04/2026.
HMRC has indicated that individuals with turnover below £20,000 may join later, or can join voluntarily, however the government is still reviewing how to bring this group in and no date has been set yet.
3. Who Will Need to Comply?
MTD for ITSA will apply to individuals who:
✔ Are self-employed – UK and overseas
✔ Receive property income (landlords) – UK and overseas
The threshold is based on the combined gross turnover from self-employment and property sources before expenses.
4. Software Requirements
Businesses must use MTD-compatible software to keep digital records and submit updates to HMRC.
Examples include:
5. Penalties
MTD will use the points-based penalty system, meaning that you will accrue penalty points for each missed deadline, rather than an automatic fine.
A fixed £200 penalty will be issued once the threshold is reached:
Example:
| Requirement | Points Threshold |
| Quarterly submissions | 4 points |
| Annual submissions | 2 points |
Persistent Lateness: Every subsequent late submission after reaching the threshold triggers another £200 fine.
Getting the right advice early can help ensure a smooth transition and ongoing compliance when the new rules come into force.
