Making Tax Digital for Income Tax (MTD for ITSA, if you want the full acronym) is HMRC's biggest change to how the self-employed and landlords report their income since Self Assessment arrived in the 1990s. After years of delays and pilots, it began in April 2026 for the highest earners. If you're self-employed or earn rental income it will affect you, and the next phases come sooner than many people realise.
What is Making Tax Digital?
Instead of submitting one annual Self Assessment tax return covering everything, you keep digital records of your income and expenses throughout the year and submit quarterly updates to HMRC. At the end of the year, you submit a final declaration to confirm your figures, claim any reliefs, and settle your tax bill.
HMRC's argument is that this makes tax administration more accurate, reduces the shock of a large annual tax bill, and catches errors earlier. The sceptic's view is that it adds a lot to the reporting burden on small businesses and landlords, and there's something to that. The legislation has passed and the rollout is underway, so the practical question now is when it applies to you and what you need to do.
The rollout timetable
MTD for Income Tax is being introduced in phases based on income level.
From April 2026: Self-employed people and landlords with qualifying income above £50,000 per year have to comply. Whether you are in this first group depends on your qualifying income in the 2024/25 tax year. Qualifying income means gross income from self-employment or property: not profit, but total receipts before expenses.
From April 2027: The threshold drops to £30,000. Anyone with qualifying income above £30,000 must comply.
From April 2028: The threshold will drop further to £20,000, bringing in a much larger group of smaller businesses and landlords.
HMRC began signing up anyone it believes should already be using MTD from September 2026, based on qualifying income above £50,000 in 2024/25. If you think you are in the first phase and haven't started, check your HMRC online account and get your software set up now.
What quarterly reporting involves
Under MTD, you'll submit four quarterly updates to HMRC each year. These aren't tax returns: they don't trigger a tax payment and they don't need to be perfect. They're a summary of your income and expenses for that three-month period, submitted through HMRC-compatible software.
By default the quarters run from 6 April to 5 July, 6 July to 5 October, 6 October to 5 January and 6 January to 5 April. Each update is due by the 7th of the month after the quarter ends, so 7 August, 7 November, 7 February and 7 May. You can choose to report by calendar quarter instead, which changes the deadlines slightly, so check the dates in your software.
After the four quarterly updates, you submit your end-of-year tax return, which HMRC calls the final declaration and which replaces the current Self Assessment return, to confirm all your income including savings, investments and employment income. The End of Period Statement that earlier versions of the scheme required was dropped in 2024. The final declaration is due by 31 January following the tax year end, the same deadline as the current Self Assessment return.
Penalties
HMRC is not issuing penalty points for late quarterly updates in the 2026/27 tax year. From 6 April 2027 a points system applies: each missed quarterly deadline earns a point, and reaching four points triggers a £200 penalty. Penalties for late tax returns and late payments apply as normal.
Digital record keeping
The core requirement is that your records must be kept digitally and submitted through MTD-compatible software. You cannot use HMRC's own online system to file quarterly updates. You need software that integrates with HMRC's API. There are a number of options ranging from spreadsheets linked to HMRC via bridging software to full accounting packages like QuickBooks, Xero, FreeAgent, Sage, and others. Most are subscription services.
For many sole traders who currently keep records on a spreadsheet or even in a notebook and do their return once a year, this changes how they work day to day. Many of the software options are easy to use, and the quarterly update itself doesn't take long if your records are in order. The problem arises if you've let bookkeeping slip and then try to catch up quarterly. That's when the burden gets heavy.
What if you have an accountant?
If you work with an accountant, they should already be planning for this on your behalf, or will be soon. MTD increases the ongoing work involved in managing your tax affairs, which will likely affect accountancy fees for anyone currently on an annual-only service. Many accountants are moving clients onto monthly bookkeeping packages or cloud accounting software subscriptions to accommodate the new requirements.
If your accountant hasn't mentioned MTD yet and you're above the £50,000 or £30,000 threshold, raise it with them. Sort out your software and processes before the deadline, not after.
Exemptions
Not everyone is brought into MTD. HMRC currently exempts people where digital record keeping is not reasonably practicable, for example due to age, disability, or remoteness of location. There are also exemptions for individuals with certain religious objections to digital technology. These exemptions need to be applied for formally and are not automatic.
Partnerships are not currently included in the MTD for Income Tax regime, though HMRC has indicated they'll be brought in at a later stage.
My view
MTD for Income Tax will mean more admin for most self-employed people and landlords, at least initially. The quarterly filing isn't onerous in itself, but it does require your bookkeeping to be kept reasonably up to date throughout the year, which is a change for people used to a once-a-year scramble before the January deadline. Whether that's good discipline or an unnecessary burden probably depends on your perspective.
What's not in doubt is that it's happening. If you're already above £50,000, you should be reporting now; if the £30,000 or £20,000 thresholds will catch you in 2027 or 2028, the time to prepare is now: choose your software, start keeping digital records, and speak to your accountant about how your service arrangement needs to change.