Do I Need to Use Making Tax Digital for Self Assessment in 2026-2028?
Comprehensive guide to Making Tax Digital for Income Tax Self Assessment (MTD ITSA). Understand who needs to comply, key dates, thresholds for landlords and self-employed, and how to prepare for the 2026, 2027, and 2028 rollout.
Quick answer
Making Tax Digital for Income Tax Self Assessment (MTD ITSA) becomes mandatory from 6 April 2026 for landlords and self-employed individuals with gross income over £50,000, extending to those over £30,000 in 2027, and planned for over £20,000 in 2028. You will need to keep digital records and submit quarterly updates to HMRC using MTD-compatible software like AccountsOS.
Understanding Making Tax Digital for Income Tax Self Assessment (MTD ITSA)
Making Tax Digital (MTD) represents a significant overhaul of the UK tax system, moving towards a fully digital approach for interactions between taxpayers and HMRC. MTD for Income Tax Self Assessment (MTD ITSA) is the next phase of this transformation, specifically targeting self-employed individuals and landlords. It aims to make tax administration more efficient, reduce errors, and provide taxpayers with a clearer, more real-time view of their tax affairs.
The core principle of MTD ITSA is that instead of submitting a single annual Self Assessment tax return, affected individuals will be required to keep digital records of their income and expenses and send summary updates to HMRC quarterly using MTD-compatible software. This change requires a proactive approach to bookkeeping and a shift in how many individuals currently manage their tax obligations. Understanding the rollout schedule and eligibility criteria is paramount for ensuring compliance and avoiding penalties.
Who Needs to Comply with MTD ITSA? Eligibility and Thresholds
The obligation to join MTD ITSA is determined by your gross income from self-employment and/or property. HMRC has confirmed a phased rollout, meaning different income thresholds will trigger mandatory compliance in different tax years. It is crucial to understand which category you fall into to prepare effectively.
MTD ITSA Rollout Schedule and Income Thresholds
HMRC will notify individuals who are required to join MTD ITSA based on their Self Assessment tax returns for the 2024/25 tax year. The rollout schedule is as follows:
| Effective date | Tax year | Gross income threshold | Details |
|---|---|---|---|
| 6 April 2026 | 2026/27 | Over £50,000 | Mandatory for self-employed individuals and landlords with gross income over £50,000. |
| 6 April 2027 | 2027/28 | Over £30,000 | Mandatory for self-employed individuals and landlords with gross income over £30,000. |
| 6 April 2028 | 2028/29 | Over £20,000 | Planned expansion to include those with gross income over £20,000, subject to further review by HMRC. |
What is 'Gross Income' for MTD ITSA? For MTD ITSA purposes, 'gross income' refers to the total amount of money you receive from your self-employment businesses and/or property rentals before any expenses, allowances, or tax reliefs are deducted. If you have multiple self-employment businesses or properties, their gross incomes are added together to determine if you meet the threshold. For example, if you have two self-employment businesses, one with £30,000 gross income and another with £25,000 gross income, your combined gross income is £55,000. This would mean you are required to join MTD ITSA from 6 April 2026.
Who is Currently Excluded or Exempt?
While MTD ITSA is expanding, certain groups are currently excluded or may be exempt. It is important to note that these exemptions can change, and you should always check the latest HMRC guidance.
- Individuals with gross income solely from employment or pensions.
- Individuals with gross income below the specified thresholds for each respective tax year.
- Trusts, estates, insolvency cases, and foreign landlords (unless they have a UK property business).
- Individuals who are unable to comply with MTD ITSA due to specific reasons, such as disability, age, remoteness of location, or religious beliefs, may apply for an exemption from HMRC. This is assessed on a case-by-case basis.
- General partnerships with only individuals as partners are currently included, but complex partnerships are not yet part of the MTD ITSA rollout.
Voluntary Early Adoption: Even if you are not yet mandated to join, you can choose to comply with MTD ITSA voluntarily. This can be a good way to familiarise yourself with the new process and software before it becomes compulsory.
How MTD ITSA Works: The Four Key Requirements
For those required to join MTD ITSA, the traditional annual Self Assessment process is replaced by a continuous digital reporting cycle. There are four fundamental requirements that you must fulfil.
- Maintain digital records of all business and property income and expenses.
- Send quarterly updates of income and expenses to HMRC using MTD-compatible software.
- Submit an End of Period Statement (EOPS) for each income source after the tax year ends.
- Submit a Final Declaration, consolidating all income sources, to finalise your tax position.
1. Digital Records: The Foundation of MTD ITSA
The cornerstone of MTD ITSA is the requirement to keep digital records of your business and property transactions. This means abandoning traditional paper ledgers or manual spreadsheets that are not digitally linked to software. Your MTD-compatible software will serve as your digital record-keeping system.
- Income: Details of all money received, including dates, amounts, and categories.
- Expenses: Records of all business and property outgoings, including dates, amounts, and expense types.
- Adjustments: Any adjustments for tax purposes, such as private use of assets or capital allowances.
Digital record-keeping is not just about storing information electronically, it is about ensuring that the data flows seamlessly into your MTD-compatible software. This can involve direct bank feeds, receipt scanning apps, or manual entry directly into the software. The key is to avoid manual re-keying of data, which is prone to errors.
2. Quarterly Updates: Regular Reporting to HMRC
Instead of waiting until the end of the tax year, MTD ITSA requires you to send summary updates of your income and expenses to HMRC every three months. These are not full tax returns, but rather summaries of your digital records for that specific quarter.
Quarterly Update Deadlines:
| Reporting period | Deadline |
|---|---|
| 6 April to 5 July | 5 August |
| 6 July to 5 October | 5 November |
| 6 October to 5 January | 5 February |
| 6 January to 5 April | 5 May |
These updates provide HMRC with a more frequent snapshot of your earnings and outgoings, helping to build a more accurate picture of your tax liability throughout the year. They also allow you to identify and correct errors much earlier than with the annual Self Assessment system. Each property business and self-employment business must have its own separate quarterly updates. If you have multiple businesses or properties, you will need to submit separate updates for each.
Example of a Quarterly Update: Sarah is a self-employed graphic designer. For the quarter 6 April to 5 July, her MTD-compatible software records her gross income as £12,000 and allowable expenses as £3,500. By 5 August, her software will generate and submit a summary to HMRC showing these figures. This process repeats for each quarter.
3. End of Period Statement (EOPS): Finalising Business Income
After the end of the tax year (5 April), and once all four quarterly updates have been submitted, you will need to submit an End of Period Statement (EOPS) for each self-employment business and property business. The EOPS allows you to make any final accounting adjustments, claims for capital allowances, or other tax adjustments that could not be included in the quarterly updates.
The deadline for submitting your EOPS is the same as the current Self Assessment filing deadline: 31 January following the end of the tax year. For example, for the tax year 2026/27, the EOPS would be due by 31 January 2028. This statement finalises the profit or loss for each individual income source, ready for consolidation.
4. Final Declaration: Your Annual Tax Position
The final step in the MTD ITSA process is the submission of a Final Declaration. This declaration consolidates all your income sources, including those subject to MTD ITSA (self-employment and property) and any other income not covered by MTD (such as employment income or pensions). It also includes any claims for reliefs and allowances, and calculates your final tax liability for the year.
The Final Declaration is essentially the MTD equivalent of your current Self Assessment tax return. The deadline for this is also 31 January following the end of the tax year. Once submitted, your tax bill for the year will be finalised, and you will be able to make your payment to HMRC.
Payment Deadlines: While reporting becomes quarterly, tax payment deadlines largely remain the same as the current Self Assessment system: 31 January following the tax year (for the balancing payment and first payment on account) and 31 July (for the second payment on account). However, with MTD ITSA, you will have a much clearer picture of your tax liability earlier, enabling better financial planning.
Choosing MTD-Compatible Software for AccountsOS
The shift to MTD ITSA mandates the use of MTD-compatible software to keep digital records and submit updates to HMRC. This software acts as the bridge between your financial transactions and HMRC. Choosing the right software is crucial for a smooth transition and ongoing compliance.
What to Look for in MTD-Compatible Software:
- HMRC Approved: Ensure the software is officially recognised by HMRC as MTD-compatible for Income Tax.
- Digital Record Keeping: It must allow you to record all income and expenses digitally, ideally with features like bank feeds or receipt scanning.
- Quarterly Submission: The software must be capable of generating and submitting the required quarterly updates directly to HMRC.
- EOPS & Final Declaration: It should support the preparation and submission of the End of Period Statement and Final Declaration.
- User-Friendly Interface: Ease of use is vital, especially if you are not an experienced bookkeeper.
- Reporting & Insights: Features that provide real-time insights into your financial performance and tax position are highly beneficial.
- Support and Training: Access to customer support and guidance materials is important for navigating any issues.
AccountsOS: Your Partner for MTD ITSA Compliance
AccountsOS is designed to simplify MTD ITSA compliance for self-employed individuals and landlords. Our platform provides an intuitive and comprehensive solution for managing your digital records and submitting your MTD ITSA reports to HMRC seamlessly.
Automated Digital Record Keeping
Easily record all income and expenses digitally, ensuring MTD compliance from day one. Say goodbye to manual data entry.
Simplified Quarterly Updates
Generate and submit your quarterly income and expense summaries to HMRC with just a few clicks, directly from your reconciled data.
Real-Time Tax Position
Understand your estimated tax liability throughout the year, helping you budget effectively and avoid year-end surprises. Gain financial clarity.
Error Reduction & Accuracy
Built-in checks, AI-powered categorisation, and intuitive workflows minimise common errors, significantly improving the accuracy of your MTD submissions.
Seamless EOPS & Final Declaration
Your digitally recorded data is continuously prepared for seamless End of Period Statements and Final Declarations, streamlining year-end processes.
Comprehensive Guidance & Support
Access to up-to-date resources, guides, and dedicated support to help you confidently navigate the MTD ITSA transition and ongoing compliance.
By utilising AccountsOS, you can focus on running your business or managing your properties, confident that your MTD ITSA obligations are being met accurately and efficiently. Our real-time insights mean you are always aware of your financial position and estimated tax liability, eliminating year-end surprises.
Penalties for Non-Compliance with MTD ITSA
HMRC has introduced a new penalty regime for MTD ITSA, which includes penalties for late submissions and late payments. It is critical to adhere to the deadlines and ensure the accuracy of your submissions to avoid these charges.
Late Submission (Quarterly Updates)
A points-based system. Each missed submission accrues a point. Accumulating points leads to monetary penalties (e.g., 4 points for quarterly submissions results in a £200 penalty).
Late Submission (EOPS/Final Declaration)
Initial £100 penalty for being 1 day late, escalating to further penalties if submissions remain outstanding for extended periods (e.g., an additional £100 after 3 months, then 5% of tax due after 6 and 12 months).
Late Payment
Interest is charged on unpaid tax from the day it becomes due. Penalties may also apply for significant delays in payment, typically 5% of the unpaid tax after 30 days, 6 months, and 12 months.
Inaccurate Records
Penalties for errors in submissions, ranging from 0% for unprompted, careful errors to 100% of the tax due for deliberate and concealed inaccuracies.
Importance of Accuracy: Beyond submission deadlines, HMRC can also levy penalties for inaccurate records or submissions. These penalties are based on the behaviour that led to the inaccuracy, ranging from careless to deliberate. Accurate digital record-keeping with MTD-compatible software significantly reduces the risk of such errors and associated penalties.
Preparing for MTD ITSA: Steps to Take Now
Even if your mandatory start date is in 2027 or 2028, proactive preparation is key to a smooth transition. The sooner you start, the more comfortable you will become with the new digital requirements.
Key Preparatory Steps:
- Assess Your Eligibility: Calculate your gross income from all self-employment and property sources for the current tax year (2024/25, 2025/26 etc.) to understand when you are likely to fall into the mandatory MTD ITSA regime. Remember, HMRC will notify you based on your 2024/25 return.
- Review Your Current Record-Keeping: Are you currently using spreadsheets, paper records, or basic accounting software? Evaluate if your current methods meet the digital record-keeping requirements of MTD ITSA. If not, plan for a transition.
- Research MTD-Compatible Software: Start looking at MTD-compatible software solutions. Consider factors like ease of use, features, cost, and support. AccountsOS offers a comprehensive solution tailored for MTD ITSA.
- Begin Digital Record Keeping Early: Even before your mandatory start date, consider adopting digital record-keeping. This will allow you to familiarise yourself with the software and processes without the pressure of HMRC deadlines.
- Understand the Quarterly Cycle: Get accustomed to thinking about your income and expenses in quarterly blocks. This shift in mindset is fundamental to MTD ITSA.
- Seek Professional Advice: If you have complex tax affairs or are unsure about any aspect of MTD ITSA, consult with an accountant or tax advisor who is familiar with the new requirements.
By taking these steps, you can ensure that you are well-prepared for the implementation of MTD ITSA, making the transition as smooth and stress-free as possible. Embracing digital tools now will not only help with compliance but also offer greater financial clarity and control over your business and property income.
Benefit of Early Adoption: AccountsOS allows you to start keeping digital records and preparing for MTD ITSA today, regardless of your mandatory start date. This means you can get ahead of the curve, learn the system, and streamline your accounting well in advance.
Conclusion: Embracing the Digital Future of Tax
Making Tax Digital for Income Tax Self Assessment marks a pivotal change in how self-employed individuals and landlords manage their tax obligations. With confirmed rollout dates starting from 6 April 2026 for those with gross income over £50,000, and subsequent years extending to lower thresholds, it is no longer a question of 'if' but 'when' you will need to comply.
The transition requires a shift to digital record-keeping and regular quarterly reporting, moving away from the traditional annual tax return. While this may seem daunting, MTD-compatible software like AccountsOS is designed to simplify this process, offering automated record-keeping, streamlined submissions, and real-time insights into your tax position. By understanding your eligibility, preparing early, and leveraging the right tools, you can navigate MTD ITSA confidently and turn a compliance requirement into an opportunity for better financial management.
Frequently asked questions
What is Making Tax Digital for Income Tax Self Assessment (MTD ITSA)?
MTD ITSA is a new HMRC initiative requiring most self-employed individuals and landlords to keep digital records and send quarterly updates of their income and expenses to HMRC using MTD-compatible software. It fundamentally shifts from annual Self Assessment to a more frequent, digital reporting process.
Who is affected by MTD ITSA and when?
MTD ITSA will become mandatory from 6 April 2026 for those with business or property income exceeding £50,000. From 6 April 2027, it will extend to those with income over £30,000. A further extension to those over £20,000 is planned for 6 April 2028, pending review.
What counts as 'income' for MTD ITSA thresholds?
For MTD ITSA eligibility, 'income' refers to your gross income from all self-employment businesses and UK property income combined, before any expenses or allowances are deducted. This aggregated gross income is the figure HMRC uses to determine if you meet the mandatory compliance threshold.
What are 'digital records' for MTD ITSA?
Digital records necessitate keeping an electronic record of all your business and property income and expenses. This typically involves using MTD-compatible software, or spreadsheets that are 'digitally linked' to such software, meaning data cannot be manually re-entered or transferred.
How often do I need to send updates to HMRC under MTD ITSA?
You are required to send an 'income and expense summary' to HMRC quarterly. These updates are due one month after the end of each tax quarter. For example, for the quarter running from 6 April to 5 July, the update must be submitted by 5 August.
What happens if I make a mistake in my quarterly update?
MTD ITSA allows for corrections. You can amend errors in a subsequent quarterly update, or more comprehensively as part of your End of Period Statement (EOPS) and Final Declaration. Prompt correction of errors is crucial to maintain accuracy and avoid potential penalties.
Can I use spreadsheets for MTD ITSA?
Yes, spreadsheets can be used for MTD ITSA, but they must be 'digitally linked' to MTD-compatible software. This means the software must be able to directly import or extract the data from your spreadsheet without any manual intervention or re-typing.
What if my income falls below the MTD ITSA threshold after I've joined?
If your qualifying income consistently falls below the mandatory threshold, you may be able to opt out of MTD ITSA. However, this is subject to specific HMRC conditions and it is often beneficial to continue using MTD-compatible software for simplified record-keeping.