Making Tax Digital for Income Tax (MTD ITSA)

Introduction to Making Tax Digital for Income Tax Self Assessment (MTD ITSA)

The landscape of tax reporting for self-employed individuals and landlords in the UK is undergoing a significant transformation with the introduction of Making Tax Digital for Income Tax Self Assessment (MTD ITSA). This initiative, spearheaded by HMRC, aims to modernise the tax system, making it more efficient, accurate, and easier for taxpayers to manage their affairs digitally. For sole traders and freelancers whose gross income from self-employment and property exceeds £50,000, MTD ITSA becomes mandatory for accounting periods starting on or after 6 April 2026.

This comprehensive guide provides an authoritative overview of the MTD ITSA rules specifically for UK freelancers and sole traders earning above the £50,000 threshold. It details the core requirements, key dates, digital record-keeping obligations, the process for submitting quarterly updates, the purpose of the End of Period Statement (EOPS), and the final annual declaration. Understanding these changes is crucial for ensuring compliance, avoiding penalties, and effectively managing your tax obligations in the new digital era. Freelancers new to the £50,000+ income bracket, or those transitioning from traditional paper-based accounting, will find particular value in grasping these forthcoming requirements.

What is Making Tax Digital for Income Tax Self Assessment (MTD ITSA)?

Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is a government initiative to digitalise the UK tax system. It fundamentally changes how self-employed individuals and landlords report their income and expenses to HMRC. Instead of a single annual Self Assessment tax return, MTD ITSA requires taxpayers to maintain digital records and send quarterly summaries of their income and expenses to HMRC using MTD-compatible software.

The core objectives of MTD ITSA are to:

• Reduce Errors: Digital record keeping and direct submission aim to minimise manual data entry errors.
• Increase Transparency: Providing more frequent updates gives taxpayers a clearer, real-time view of their tax position.
• Simplify Tax Management: Integrating tax reporting into daily business activities through software.
• Improve Efficiency: Streamlining the reporting process for both taxpayers and HMRC.

MTD ITSA introduces a structured reporting cycle that replaces the annual Self Assessment return for business income. This cycle comprises four key stages: digital record keeping, quarterly updates, an End of Period Statement (EOPS), and a Final Declaration. Each stage plays a vital role in ensuring that HMRC receives accurate and timely information about your business activities.

Key Components of MTD ITSA

Digital Record Keeping

Maintain records of income and expenses using MTD-compatible software.

Quarterly Updates

Submit summaries of income and expenses to HMRC every three months.

End of Period Statement (EOPS)

Submit an annual statement to finalise business profits and make accounting adjustments.

Final Declaration

Submit an annual declaration combining all income sources and claiming reliefs.

Who is Affected by MTD ITSA from April 2026?

From April 2026, MTD ITSA will become mandatory for a specific segment of taxpayers. It is crucial for freelancers and sole traders to accurately assess their eligibility criteria to ensure compliance.

The £50,000 Income Threshold

The primary criterion for mandatory MTD ITSA compliance from April 2026 is the level of gross income. You will be mandated to follow MTD ITSA rules if:

• You are a self-employed individual, a sole trader, or a freelancer.
• You receive income from property (e.g., rental income).
• Your total gross income from these sources (self-employment and property) is more than £50,000 in a tax year.

This threshold refers to your gross income before any expenses are deducted. If your combined gross income from all self-employment activities and property income exceeds £50,000 in a tax year, you will fall within the scope of MTD ITSA.

When Does it Apply?

The requirements for MTD ITSA apply to accounting periods that start on or after 6 April 2026. This means that if your accounting period begins on, for example, 1 April 2026, you will not be mandated to comply for that period. However, if your accounting period starts on 6 April 2026 or any date thereafter, MTD ITSA rules will apply.

Future Threshold Changes: It is important to note that HMRC plans to extend MTD ITSA to those with gross income over £30,000 from April 2027. While this guide focuses on the £50,000+ threshold for 2026, individuals with lower incomes should be aware of future changes.

Exemptions from MTD ITSA

While the scope of MTD ITSA is broad, certain individuals and entities are exempt from the requirements:

• Individuals with gross income from self-employment and property below the £50,000 threshold (until April 2027).
• Companies (these are subject to MTD for Corporation Tax, a separate initiative).
• Partnerships where all partners are individuals and the partnership's gross income is below the threshold.
• Trusts, estates, and non-resident companies.
• Individuals who are digitally excluded or for whom it is not reasonably practicable to use digital tools due to age, disability, or location. An application for exemption must be made to HMRC.

If you believe you may be exempt, you should contact HMRC or your accountant for clarification. It is always better to confirm your status rather than assume non-compliance.

Key Dates and Deadlines for MTD ITSA

MTD ITSA introduces a new rhythm for tax reporting, moving from a single annual submission to a series of digital updates throughout the tax year. Understanding these deadlines is paramount for compliance and avoiding penalties.

The MTD Reporting Cycle

The MTD ITSA reporting cycle typically follows the standard tax year, running from 6 April to 5 April. For each tax year, you will have:

• Four Quarterly Updates: Summaries of your income and expenses for each three-month period.
• One End of Period Statement (EOPS): An annual finalisation of your business profits for the tax year.
• One Final Declaration: Your overall annual tax return, combining all income sources.

Important Dates to Remember from April 2026

Event	Date
MTD ITSA Commencement (for £50k+ income)	April 2026
First Quarterly Update Due	August 2026 (for quarter Apr-Jul)
End of Period Statement (EOPS) Deadline	31 January following tax year
Final Declaration Deadline	31 January following tax year
Tax Payment Deadlines	31 January and 31 July (Payments on Account)

Quarterly Update Deadlines

The quarterly updates are due one month and one week after the end of each tax quarter. For an accounting period aligned with the tax year (6 April to 5 April), the deadlines are:

Standard Quarterly Deadlines (Tax Year Aligned)

Period Start	Period End	Submission Deadline
6 April	5 July	5 August
6 July	5 October	5 November
6 October	5 January	5 February
6 January	5 April	5 May

If your business has an accounting period that does not align with the tax year, your quarterly reporting periods will be different. For example, if your accounting year ends on 31 March, your quarterly periods might be April-June, July-September, October-December, and January-March. The submission deadline will still be one month and seven days after the end of your chosen quarterly period.

End of Period Statement (EOPS) and Final Declaration Deadlines

Both the EOPS for each business and the Final Declaration, which covers all your income sources, are due by 31 January following the end of the tax year. For example, for the tax year 2026/2027 (6 April 2026 to 5 April 2027), the EOPS and Final Declaration would be due by 31 January 2028.

Tax Payment Deadlines

MTD ITSA does not change the existing deadlines for paying your Income Tax. You will still make Payments on Account for the current tax year, due by 31 January and 31 July. Any balancing payment for the previous tax year, or the first Payment on Account for the current year, is due by 31 January following the tax year end. The second Payment on Account is due by 31 July.

Example: Tax Year 2026/2027

• Quarterly Updates: Due 5 August 2026, 5 November 2026, 5 February 2027, 5 May 2027.
• EOPS & Final Declaration: Due 31 January 2028.
• Payments on Account:
  • First 2026/27 Payment: 31 January 2027
  • Second 2026/27 Payment: 31 July 2027
  • Balancing Payment for 2026/27 (if any): 31 January 2028

Digital Record Keeping Requirements Under MTD ITSA

The cornerstone of MTD ITSA is the requirement to keep digital records of your business income and expenses. This is a fundamental shift from traditional paper-based or manual record-keeping methods.

What Constitutes Digital Records?

Under MTD ITSA, your records must be kept and maintained digitally from the start to the end of your business's accounting period. This means that you cannot simply enter summarised figures into software at the end of the quarter. Instead, each transaction must be recorded digitally.

The types of records that must be kept digitally include:

• All income received from self-employment and property.
• All business expenses, categorised according to HMRC rules.
• Dates of all transactions.
• Bank account details used for business.
• Records of any personal income or gains that need to be declared.

MTD-Compatible Software

To comply with MTD ITSA, you must use MTD-compatible software that can:

• Record and store your business transactions digitally.
• Calculate and generate the required quarterly summaries.
• Submit these summaries directly to HMRC via their MTD Application Programming Interface (API).
• Receive information from HMRC, such as confirmation of submissions.

HMRC maintains a list of software providers that offer MTD-compatible solutions. AccountsOS is designed to be fully MTD ITSA compliant, providing an intuitive platform for digital record keeping and submissions.

The Role of Spreadsheets

While HMRC encourages the use of full accounting software, it acknowledges that some businesses may prefer to use spreadsheets for initial record keeping. If you use spreadsheets, they must be "digitally linked" to MTD-compatible bridging software.

"Digitally linked" means that the transfer of data from your spreadsheet to the MTD software must be automated, without manual data entry. Examples of digital links include:

• Formulas within the spreadsheet that link cells.
• Macros.
• CSV file export and import.
• API integration.

Simply copying and pasting figures from a spreadsheet into software is not considered a digital link and will not meet MTD requirements.

Benefits of Digital Record Keeping

Beyond compliance, digital record keeping offers several advantages for freelancers:

• Improved Accuracy: Reduces human error associated with manual calculations and data entry.
• Real-Time Financial Overview: Provides up-to-date insights into your business performance.
• Easier Expense Tracking: Simplifies categorisation and ensures all allowable expenses are captured.
• Time Saving: Automates many routine accounting tasks, freeing up your time.
• Better Tax Planning: With clearer financial data, you can make more informed decisions about your tax liabilities.

Adopting MTD-compatible software early can help smooth the transition and allow you to fully leverage these benefits.

How to Submit Quarterly Updates to HMRC

Quarterly updates are the most frequent reporting requirement under MTD ITSA. These submissions provide HMRC with a summary of your business income and expenses for each three-month period.

What to Include in a Quarterly Update

Each quarterly update requires you to report the total income and total expenses for your business during that specific quarter. It is important to note that these are summaries, not detailed itemised lists of every transaction. The software you use will compile these totals from your digital records.

Key points for quarterly updates:

• Income: Report all gross income received from your self-employment or property business.
• Expenses: Report all allowable business expenses, categorised as required by HMRC.
• No Tax Calculation: You do not calculate or pay tax at the quarterly update stage. These submissions are purely for reporting purposes to give HMRC an estimate of your year-to-date profits.
• Adjustments: While detailed adjustments (like capital allowances or private use adjustments) are made in the End of Period Statement, basic adjustments for errors can be made in subsequent quarterly updates.

The Submission Process

The process for submitting quarterly updates is designed to be straightforward when using MTD-compatible software:

1. Record Transactions: Throughout the quarter, diligently record all your income and expenses digitally using your MTD-compatible software.
2. Review and Categorise: Ensure all transactions are correctly categorised as per HMRC guidelines.
3. Generate Summary: At the end of the quarter, your software will automatically compile the required summary figures.
4. Submit to HMRC: With a few clicks, you will authorise your software to send the quarterly summary directly to HMRC.
5. Receive Confirmation: HMRC will send a confirmation of receipt, which your software should display.

It is essential to submit these updates by the specified deadlines to avoid potential penalties.

Worked Example: Quarterly Update Submission

A freelance consultant, David, has an accounting period aligned with the tax year. For the quarter 6 April to 5 July 2026, his MTD-compatible software shows:

• Gross Income from Consulting Fees: £18,500
• Allowable Business Expenses (Software, Travel, Professional Development): £2,800

David needs to submit his first quarterly update by 5 August 2026. His software will generate a summary reporting:

• Total Income: £18,500
• Total Expenses: £2,800

David simply reviews the summary generated by AccountsOS and clicks "Submit to HMRC". He receives instant confirmation. No tax calculation is performed at this stage.

Worked Example: Quarterly Update with Property Income

Sarah, a freelancer, also has property rental income. For the quarter 6 April to 5 July 2026, her records show:

• Freelance Income: £12,000
• Freelance Expenses: £1,500
• Property Rental Income: £3,000
• Property Expenses (Repairs, Agent Fees): £500

Sarah must submit two separate quarterly updates by 5 August 2026:

• For Freelance Business: Total Income: £12,000; Total Expenses: £1,500
• For Property Business: Total Income: £3,000; Total Expenses: £500

Each business income source requires its own set of digital records and separate quarterly submissions. AccountsOS manages this by allowing multiple businesses within a single account.

Understanding the End of Period Statement (EOPS)

The End of Period Statement (EOPS) is a crucial annual submission under MTD ITSA. It serves to finalise the income and expenses for each individual business (self-employment or property) for the entire tax year, allowing for accounting adjustments that are not typically included in the quarterly updates.

Purpose of the EOPS

The EOPS brings together the four quarterly updates for a specific business and allows you to apply annual accounting adjustments. Its main purposes are:

• Finalise Business Profits: To calculate the final, accurate taxable profit or loss for the business for the tax year.
• Apply Adjustments: To incorporate various accounting and tax adjustments that are typically made annually.
• Claim Allowances: To claim capital allowances and other annual reliefs.
• Correct Errors: To rectify any errors or omissions from the quarterly updates.

You must submit a separate EOPS for each self-employment business and each property business you operate.

Common Adjustments in the EOPS

While quarterly updates focus on raw income and expense totals, the EOPS is where you apply more complex, annual adjustments. These can include:

• Capital allowances: Deductions for the depreciation of assets.
• Private use adjustments: Removing costs that have a personal element.
• Stock adjustments: Valuing opening and closing stock.
• Accruals and prepayments: Matching income and expenses to the correct period.
• Disallowable expenses: Identifying expenses not permitted for tax relief.
• Overlap profits: Adjusting for profits taxed in prior periods due to differing accounting dates.
• Loss relief claims: Utilising business losses against current or future profits.

EOPS Submission Deadline

The EOPS must be submitted by 31 January following the end of the tax year. For example, for the tax year 2026/2027 (ending 5 April 2027), the EOPS is due by 31 January 2028.

Worked Example: EOPS Adjustments

Following David's freelance consulting business from the previous example, his four quarterly updates for the tax year 2026/2027 showed total income of £75,000 and total expenses of £10,000.

When preparing his EOPS, David identifies the following annual adjustments:

• Capital Allowances Claim: £1,500 (for new computer equipment)
• Private Use Adjustment: £200 (for personal use of his business mobile phone)
• Disallowable Entertainment Expenses: £100

His EOPS will therefore adjust his reported profit:

• Total Income from Quarterly Updates: £75,000
• Total Expenses from Quarterly Updates: £10,000
• Add: Capital Allowances: -£1,500 (reduces taxable profit)
• Add: Private Use Adjustment: +£200 (increases taxable profit)
• Add: Disallowable Expenses: +£100 (increases taxable profit)
• Final Adjusted Business Profit: £75,000 - £10,000 - £1,500 + £200 + £100 = £63,800

This final adjusted profit of £63,800 is what will be carried forward to the Final Declaration.

The Final Declaration: Consolidating Your Tax Position

The Final Declaration is the ultimate annual submission under MTD ITSA. It replaces the traditional Self Assessment tax return for individuals subject to MTD and brings together all your income sources, allowances, and reliefs to calculate your final tax liability for the year.

What to Include in the Final Declaration

The Final Declaration is a comprehensive statement that includes:

• All EOPS Figures: The finalised profit or loss figures from each of your self-employment and property businesses.
• Other Income: Any other income not covered by MTD ITSA, such as employment income (PAYE), dividends, bank interest, capital gains, or foreign income.
• Personal Allowances and Reliefs: Claims for your personal allowance, marriage allowance, pension contributions, gift aid, and other tax reliefs.
• Tax Calculation: The final calculation of your total Income Tax and National Insurance Contributions (NICs) for the tax year.

Unlike the quarterly updates and EOPS, which focus solely on business income, the Final Declaration provides a holistic view of your entire financial position for tax purposes.

The Submission Process

Once all your EOPS have been submitted, your MTD-compatible software will use this information, combined with any other income data you provide, to prepare your Final Declaration.

1. Input Other Income: Manually input or link data for non-business income sources (e.g., P60 data for PAYE income).
2. Claim Reliefs: Enter details of any tax reliefs or allowances you wish to claim.
3. Review Final Calculation: Your software will calculate your total tax liability, including Income Tax and NICs.
4. Submit to HMRC: Authorise your software to send the Final Declaration to HMRC.
5. Receive Tax Bill: HMRC will issue your final tax bill, outlining any balancing payment due or refund owed, and your Payments on Account for the next tax year.

Final Declaration Deadline

The Final Declaration must be submitted by 31 January following the end of the tax year. This is the same deadline as the EOPS. For the tax year 2026/2027 (ending 5 April 2027), the Final Declaration is due by 31 January 2028.

Worked Example: Final Declaration

Continuing with David's example:

• Final Adjusted Business Profit (from EOPS): £63,800
• Employment Income (P60): £5,000
• Bank Interest: £150
• Personal Allowance: £12,570 (for 2026/27, assuming no changes)
• Pension Contributions (Gross): £2,000

David's MTD-compatible software will combine this information to calculate his final tax:

• Total Income: £63,800 (business) + £5,000 (employment) + £150 (interest) = £68,950
• Less: Personal Allowance: -£12,570
• Less: Pension Contributions (reduces taxable income): -£2,000
• Taxable Income: £68,950 - £12,570 - £2,000 = £54,380

The software then applies the relevant Income Tax and National Insurance rates to calculate the final tax liability. This comprehensive calculation is presented to David for review before he submits the Final Declaration to HMRC.

This process ensures all income and reliefs are accounted for, leading to an accurate final tax bill.

How MTD ITSA Affects Payments on Account

One common misconception about MTD ITSA is that quarterly updates will trigger quarterly tax payments. This is not the case. MTD ITSA primarily changes the reporting mechanism, not the payment schedule.

Payments on Account Remain Unchanged

For individuals who pay tax through Self Assessment, the system of Payments on Account remains in place. These payments are advance payments towards your next year's tax bill and are due in two instalments:

• First Payment: Due by 31 January in the tax year.
• Second Payment: Due by 31 July following the end of the tax year.

Each payment is typically 50% of your previous year's tax liability. Any remaining tax for the previous year (a "balancing payment") is also due by 31 January.

MTD ITSA's quarterly updates provide HMRC with more up-to-date information about your earnings, which could theoretically be used to adjust Payments on Account more frequently. However, HMRC has confirmed that the payment schedule will not change with the introduction of MTD ITSA.

Estimating and Reducing Payments on Account

While the payment dates are fixed, the real-time data from your quarterly updates can be invaluable for managing your Payments on Account.

• Better Forecasting: With quarterly insights into your profits, you will have a more accurate picture of your likely annual tax bill. This allows you to set aside funds appropriately, avoiding a large balancing payment shock.
• Reducing Payments: If your business income is expected to be significantly lower in the current tax year compared to the previous one, you can apply to HMRC to reduce your Payments on Account. The improved visibility from MTD ITSA will make such estimations more reliable. However, be cautious when reducing payments, as underestimating could lead to interest charges.
• New Freelancers: For new freelancers or those whose income has just surpassed the £50,000 threshold, the first tax bill can be a surprise. It will include tax for the previous year and the first Payment on Account for the current year. MTD ITSA's quarterly reporting can help new freelancers prepare for this by providing ongoing visibility of their accumulating tax liability.

Example: Payments on Account Management

A freelancer's tax bill for 2025/2026 was £10,000.

Due 31 January 2027: £5,000 (1st Payment on Account for 2026/2027) + any balancing payment for 2025/2026.

Due 31 July 2027: £5,000 (2nd Payment on Account for 2026/2027).

During 2026/2027, their MTD quarterly updates indicate their profit is significantly lower than anticipated. By reviewing their MTD data, they can confidently apply to HMRC to reduce their Payments on Account, potentially paying less on 31 January 2027 and 31 July 2027, thus managing their cash flow more effectively.

Penalties for Non-Compliance with MTD ITSA

HMRC has a robust penalty regime in place for non-compliance with MTD ITSA, similar to existing Self Assessment penalties but with added provisions for the new digital reporting requirements. It is essential to understand these to avoid unnecessary charges.

Late Submission Penalties

MTD ITSA introduces a new points-based penalty system for late submissions of quarterly updates, EOPS, and the Final Declaration.

Scenario	Penalty
Failure to keep digital records	Up to £300 for each failure
Failure to submit quarterly updates	Point-based system, leading to £200 per failure
Failure to submit EOPS or Final Declaration	Similar to existing Self Assessment penalties
Late payment of tax	Interest charged, plus potential surcharges

The new penalty system for late submissions works as follows:

• Points: For each late submission (quarterly update, EOPS, or Final Declaration), you will receive a point.
• Penalty Threshold: Once you accumulate a certain number of points within a rolling period (e.g., 4 points for annual filers, 2 points for quarterly filers), a penalty of £200 is issued.
• Penalty Reset: Points expire after a certain period of compliance.

This system is designed to penalise persistent non-compliance rather than isolated errors. However, even a single missed deadline can start the accumulation of points.

Failure to Keep Digital Records

A significant new penalty under MTD ITSA relates to the failure to keep digital records. If HMRC finds that you have not maintained your records digitally as required, you could face penalties of up to £300 for each failure to comply. This underscores the importance of adopting MTD-compatible software and processes from the outset.

Late Payment Penalties and Interest

Existing penalties for late payment of tax will continue to apply. These include:

• Interest: HMRC charges interest on any unpaid tax from the due date until the date it is paid. The interest rate is typically the Bank of England base rate plus 2.5%.
• Surcharges: For seriously late payments, HMRC can impose surcharges on top of the interest. These can be 5% of the unpaid tax after 30 days, another 5% after 6 months, and a final 5% after 12 months.

Important: HMRC is generally lenient with penalties during the initial phase of new tax systems, often offering a "soft landing" period. However, this is not guaranteed, and it is always best practice to aim for full compliance from the start to avoid any penalties.

Benefits and Challenges of MTD ITSA for Freelancers

Making Tax Digital for Income Tax Self Assessment represents a significant shift, bringing both potential advantages and new challenges for freelancers and sole traders.

Potential Benefits

• Improved Financial Awareness: Quarterly reporting forces a more regular review of finances, leading to better understanding of business performance and cash flow throughout the year.
• Reduced Errors: Digital record keeping and direct submissions minimise manual input, reducing the likelihood of errors that could lead to incorrect tax calculations or penalties.
• Smoother Tax Planning: With real-time data and frequent updates, freelancers can better estimate their tax liability, making it easier to budget for Payments on Account and avoid year-end surprises.
• Streamlined Processes: MTD-compatible software can automate many routine accounting tasks, saving time and effort compared to manual record keeping.
• Faster Tax Refunds: In some cases, more accurate and timely data could lead to quicker processing of refunds or adjustments.

Potential Challenges

• Initial Setup and Learning Curve: Transitioning to new software and digital processes can require an initial investment of time and effort to learn and adapt.
• Cost of Software: While free options exist, many MTD-compatible software solutions incur a subscription cost, which is a new business expense for some.
• Increased Reporting Frequency: Moving from annual to quarterly reporting means more frequent engagement with tax obligations, which could be perceived as an increased administrative burden.
• Ensuring Accuracy: While software reduces errors, the onus remains on the taxpayer to ensure data is correctly categorised and accurate before submission.
• Digital Exclusion: For those less comfortable with technology, or without reliable internet access, MTD ITSA presents significant hurdles, though HMRC does offer exemptions.

For freelancers earning over £50,000, MTD ITSA is an unavoidable change. Proactive preparation and embracing suitable digital tools can help mitigate the challenges and maximise the potential benefits.

How AccountsOS Simplifies MTD ITSA Compliance

AccountsOS is purpose-built to help UK freelancers and sole traders navigate the complexities of Making Tax Digital for Income Tax Self Assessment, ensuring seamless compliance and peace of mind.

Automated Digital Record Keeping

Connect your bank feeds and easily categorise transactions to meet MTD requirements effortlessly.

Seamless Quarterly Updates

Generate and submit your income and expense summaries to HMRC directly from AccountsOS.

EOPS & Final Declaration Support

AccountsOS helps compile the necessary data for your annual statements and final tax submissions.

Real-Time Tax Estimates

Understand your potential tax liability throughout the year, avoiding year-end surprises.

Frequently asked questions

When does MTD for Income Tax start for those earning over £50,000?

Making Tax Digital for Income Tax Self Assessment (MTD ITSA) will apply to self-employed individuals and landlords with gross income over £50,000 for accounting periods starting on or after 6 April 2026.

Do I still need to complete a Self Assessment tax return?

Yes, MTD ITSA does not replace Self Assessment entirely. Instead, it changes how you report your income during the tax year, requiring quarterly updates, an End of Period Statement, and a Final Declaration, which collectively replace the traditional annual Self Assessment return for business income.

What does 'digital record keeping' mean?

Digital record keeping means maintaining your business income and expenses in a digital format, typically using MTD-compatible software. This software must be able to send summaries of your data directly to HMRC.

What if my income falls below the £50,000 threshold?

If your gross income falls below £50,000, you will generally not be required to comply with MTD ITSA from April 2026. However, it is advisable to continue digital record keeping as the threshold may be lowered in future years (e.g., to £30,000 from April 2027).

How do quarterly updates affect my tax payments?

Quarterly updates are for reporting purposes only; they do not change the existing tax payment deadlines. You will still make Payments on Account by 31 January and 31 July, with any balancing payment due by 31 January after the tax year ends.

Can I use spreadsheets for MTD ITSA?

You can use spreadsheets to record your transactions, but they must be 'digitally linked' to MTD-compatible software that can transmit the required summaries to HMRC. This means manual data entry into the software from the spreadsheet is not permitted; data must be transferred digitally.

What is an End of Period Statement (EOPS)?

The EOPS is an annual summary where you finalise your business income and expenses for the tax year, making any necessary accounting adjustments and claiming reliefs. It is submitted after your fourth quarterly update and before your Final Declaration.

What if I have multiple income sources?

If you have multiple self-employment or property income sources, you will need to keep digital records and submit separate quarterly updates for each business. Your Final Declaration will then combine all income sources, including any non-business income, to calculate your overall tax liability.

Related guides

• MTD for Income Tax Overview
• Self Assessment Guide
• Business Expenses Guide