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 was introduced in the 1990s. After years of delays and pilots, the rollout has finally begun. If you're self-employed or earn rental income, it will affect you, and the timeline is closer than many people realise.
What is Making Tax Digital?
The idea behind Making Tax Digital is straightforward: 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 significantly increases the reporting burden on small businesses and landlords — and there's something to that. However, 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 are required to comply. 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 is expected to drop further to £20,000, bringing in a much larger group of smaller businesses and landlords.
If you're currently in a pilot or have already signed up voluntarily, you'll already know what's involved. If you haven't, now is the time to start preparing — particularly if you're in the first phase.
What quarterly reporting actually 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 essentially a summary of your income and expenses for that three-month period, submitted through HMRC-compatible software.
The quarterly periods follow a specific schedule: April to June, July to September, October to December, and January to March. Each update is due within one month of the end of the quarter.
After the four quarterly updates, you submit an End of Period Statement (EOPS) and then a Final Declaration (which replaces the current Self Assessment return) to confirm all your income including savings, investments and employment income. The Final Declaration is due by 31 January following the tax year end — the same deadline as the current Self Assessment return.
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 a piece of 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 is a genuine change to how they work day to day. The good news is that many of the software options are straightforward 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 becomes real.
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. The reality is that 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, it's worth raising it. The time to sort out your software and processes is 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 honest 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 that your bookkeeping is 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 change is good discipline or an unnecessary burden probably depends on your perspective.
What's not in doubt is that it's happening. If you're above the income thresholds, 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.