MTD for Income Tax: A Guide for UK Sole Traders

UK sole traders and landlords with qualifying income over £50,000 must now transition to HMRC's Making Tax Digital for Income Tax Self Assessment (MTD ITSA), replacing the annual Self Assessment return with mandatory quarterly digital updates and a year-end final declaration.

Starts For: Income over £50,000
First Update Due: 7 August 2026
Filing Frequency: Quarterly + Year-End

Learn more at GOV.UK

Introduction: The Dawn of Digital Tax Reporting

HMRC's Making Tax Digital (MTD) initiative marks a significant shift in how UK taxpayers manage their affairs. For sole traders and landlords, the most impactful change is the introduction of MTD for Income Tax Self Assessment (MTD ITSA). This new regime, which began for specific groups from April 2026, fundamentally alters the annual tax reporting cycle, moving from a single yearly submission to more frequent, digital updates.

Gone are the days of compiling a year's worth of financial data just before the 31 January deadline. Instead, MTD ITSA mandates digital record keeping and the submission of quarterly summaries of income and expenses, culminating in an End of Period Statement (EOPS) and a Final Declaration. This comprehensive guide will navigate the complexities of MTD ITSA, detailing who is affected, what needs to be done, critical deadlines, and how AccountsOS can streamline your compliance journey. Understanding these changes now is crucial for ensuring a smooth transition and avoiding potential penalties.

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

Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is HMRC's program to modernise the tax system, making it easier for individuals and businesses to get their tax right and keep their tax affairs up to date. It replaces the traditional annual Self Assessment tax return with a new digital reporting process.

The Core Principles of MTD ITSA

At its heart, MTD ITSA is built around three fundamental requirements:

Digital Record Keeping: Taxpayers must keep digital records of their income and expenses using MTD-compatible software. This means moving away from paper receipts and manual ledgers to a fully digital system.
Quarterly Updates: Instead of one annual submission, taxpayers must send a summary of their business income and expenses to HMRC every three months. These are known as 'quarterly updates' and provide HMRC with a near real-time view of your earnings.
Year-End Finalisation: At the end of the tax year, taxpayers must submit an End of Period Statement (EOPS) for each business, followed by a Final Declaration. The EOPS allows for accounting adjustments, while the Final Declaration consolidates all income sources and finalises the tax position.

Comparison with Traditional Self Assessment

The shift from traditional Self Assessment (SA) to MTD ITSA represents a significant change in methodology, not just technology.

Feature	Traditional Self Assessment	MTD ITSA
Record Keeping	Paper or digital, no specific format.	Mandatory digital records using MTD-compatible software.
Reporting Frequency	One annual tax return.	Four quarterly updates, plus year-end EOPS and Final Declaration.
Submission Method	Online via HMRC portal or paper form.	Directly from MTD-compatible software to HMRC.
Tax Payments	Payments on Account (31 Jan, 31 July) and balancing payment (31 Jan).	Payment dates remain largely the same, but real-time tax estimates are available.
Penalties	Fixed penalties for late filing, interest for late payment.	Points-based system for late submissions, plus fixed penalties and interest for late payments.

The move to MTD ITSA is designed to reduce errors, provide taxpayers with a clearer, more current view of their tax position, and make interactions with HMRC more efficient. For AccountsOS users, these changes are an opportunity to leverage technology for seamless compliance.

Who is Affected by MTD ITSA?

HMRC is implementing MTD ITSA in phases. It is crucial for sole traders and landlords to understand if and when they will be required to comply.

The Phased Rollout

The MTD ITSA regime commenced for the tax year beginning 6 April 2026 for specific groups of taxpayers.

Tax Year 2026/27: Over £50,000. First phase for sole traders and landlords.
Tax Year 2027/28: Over £30,000. Second phase, expanding to more taxpayers.

This means that if your total gross income from self-employment and/or property exceeds £50,000 in the tax year 2025/26, you will be mandated to follow MTD ITSA rules for the tax year 2026/27. The threshold then drops to £30,000 for the tax year 2027/28, bringing more individuals into the MTD ITSA fold.

Calculating Your Gross Income

The "qualifying income" for MTD ITSA includes:

Gross income from one or more self-employment businesses.
Gross income from one or more UK property businesses.

It is crucial to understand that this threshold refers to your gross income before any expenses or allowances are deducted. If you have multiple self-employment businesses or property income, these gross amounts are added together to determine if you meet the threshold. For instance, if you have a sole trader business earning £30,000 gross and a property rental business earning £25,000 gross, your total qualifying income is £55,000, meaning you would be mandated for MTD ITSA from April 2026.

What if my income fluctuates? HMRC will base your MTD ITSA obligation on your income from the previous tax year. If your income falls below the threshold in a subsequent year, you may be able to opt out, but you must notify HMRC and confirm your eligibility.

Who is Excluded (for now)?

While MTD ITSA is expanding, certain entities and income types are currently excluded:

Limited Companies: These fall under Corporation Tax and will eventually be subject to MTD for Corporation Tax, but not MTD ITSA.
Partnerships: General partnerships with only individuals as partners will be mandated from April 2027. More complex partnerships (e.g., those with corporate partners) will follow later.
Individuals with only employment income, pension income, or investment income: If you do not have self-employment or property income above the threshold, you are not currently mandated for MTD ITSA.
Individuals who are digitally excluded: HMRC has provisions for those who genuinely cannot engage digitally due to age, disability, location, or other reasons.

It is important to regularly check HMRC guidance as the MTD program continues to evolve, and thresholds or exemptions may be updated.

Key Requirements of MTD ITSA

Complying with MTD ITSA involves more than just submitting data. It requires a fundamental shift in how you manage your financial records throughout the year.

1. Digital Record Keeping

The cornerstone of MTD ITSA is the requirement to keep digital records. This means that all your business income and expenses must be recorded and stored electronically. Paper-based systems, even if meticulously maintained, are no longer sufficient on their own.

What constitutes digital records?

Income: Records of all sales, services rendered, and other revenue generated by your business.
Expenses: Records of all business purchases, including supplier invoices, receipts, and other proof of expenditure.
Date of Transaction: The actual date the income was received or expense incurred.
Type of Transaction: A description that allows for proper categorisation (e.g., 'sale of goods', 'office supplies', 'travel').
Amount: The monetary value of the transaction.
VAT (if applicable): If you are VAT registered, VAT elements must also be recorded digitally.

This digital record-keeping must be done using MTD-compatible software, such as AccountsOS, or a combination of spreadsheets and "bridging software" that can transmit the data to HMRC. The software must maintain a digital link between your records and the submissions made to HMRC.

2. Quarterly Updates (Income and Expenses)

Four times a year, you will need to send HMRC a summary of your business income and expenses. These 'quarterly updates' provide HMRC with a regular snapshot of your trading activity.

Each quarterly update will cover a specific three-month period aligned with the tax year (6 April to 5 April). The data submitted will typically include:

Total income for the quarter.
Total expenditure for the quarter, broken down by category (e.g., motor expenses, office costs, professional fees).

These updates are not full tax returns and do not require complex adjustments or claims at this stage. Their purpose is to provide HMRC with a regular, high-level view of your finances. AccountsOS automates the compilation of this data, allowing you to review and submit with confidence.

3. End of Period Statement (EOPS)

After the end of your accounting period (which for most sole traders will be 5 April), you must submit an End of Period Statement (EOPS) for each business you operate. This statement allows you to make any necessary accounting adjustments before finalising your tax position.

The EOPS is where you:

Apply accounting adjustments (e.g., accruals, prepayments, depreciation of assets).
Claim capital allowances for business assets.
Account for private use adjustments on expenses.
Adjust for any income not previously included in quarterly updates.

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

4. Final Declaration

The Final Declaration is the last step in your MTD ITSA reporting cycle. It consolidates all your income sources, not just your business and property income, and allows for the calculation of your final tax liability.

The Final Declaration will include:

All business and property income and expenses (as finalised in the EOPS).
Other sources of income, such as employment income, dividends, interest, and pension income.
Any tax reliefs or allowances you are entitled to (e.g., personal allowance, pension contributions).

Once submitted, HMRC will issue your final tax calculation. The Final Declaration is also due by 31 January following the end of the tax year, alongside the EOPS. This comprehensive reporting ensures that all your taxable income is accounted for, and your final tax bill is accurate.

Detailed Timeline and Deadlines for MTD ITSA

Navigating the new MTD ITSA deadlines is critical for compliance. Unlike the single annual Self Assessment deadline, MTD ITSA introduces multiple submission points throughout the year.

Key MTD ITSA Deadlines for a Tax Year (e.g., 2026/27)

The tax year runs from 6 April to 5 April. For mandated taxpayers, the reporting cycle will look like this:

Submission Type	Reporting Period	Deadline
Quarterly Update 1	6 April - 5 July	7 August
Quarterly Update 2	6 July - 5 October	7 November
Quarterly Update 3	6 October - 5 January	7 February
Quarterly Update 4	6 January - 5 April	7 May
End of Period Statement (EOPS)	After tax year end	31 January following tax year
Final Declaration	After EOPS	31 January following tax year

Tax Payment Deadlines

While MTD ITSA changes how you report, the dates for paying your Income Tax generally remain the same as under traditional Self Assessment. This includes Payments on Account and any balancing payment.

Payment Type	Due Date for 2026/27 Tax Year
Tax Payment (First)	31 January 2027
Tax Payment (Second)	31 July 2027
Balancing Payment	31 January 2028

Worked Example: A Full MTD ITSA Cycle for 2026/27

Let's illustrate the timeline for a sole trader mandated for MTD ITSA for the tax year 2026/27 (6 April 2026 - 5 April 2027).

Scenario: Sole Trader 'Digital Designs Ltd'

6 April 2026: Start of the 2026/27 tax year. Digital record keeping begins.
7 August 2026: Deadline for Quarterly Update 1 (6 April 2026 - 5 July 2026).
7 November 2026: Deadline for Quarterly Update 2 (6 July 2026 - 5 October 2026).
31 January 2027: Deadline for the first Payment on Account for the 2026/27 tax year (based on previous year's liability).
7 February 2027: Deadline for Quarterly Update 3 (6 October 2026 - 5 January 2027).
7 May 2027: Deadline for Quarterly Update 4 (6 January 2027 - 5 April 2027).
31 July 2027: Deadline for the second Payment on Account for the 2026/27 tax year.
31 January 2028: Deadline for:
- Submission of End of Period Statement (EOPS) for 2026/27.
- Submission of Final Declaration for 2026/27.
- Payment of any balancing tax due for 2026/27.
- First Payment on Account for the 2027/28 tax year.

This example highlights the increased frequency of interaction with HMRC and the importance of timely digital record keeping. AccountsOS helps you manage these deadlines efficiently, providing reminders and simplifying the submission process.

Choosing MTD-Compatible Software

The backbone of MTD ITSA compliance is the use of MTD-compatible software. This software must be able to record your transactions digitally, categorise them appropriately, and then communicate directly with HMRC's systems.

Why MTD-Compatible Software is Essential

Under MTD ITSA, you cannot simply type your figures into the HMRC website or send a spreadsheet directly. The law requires that your records are kept digitally from the start and that your quarterly updates, EOPS, and Final Declaration are submitted directly from 'functional compatible software'.

This software serves several critical functions:

Digital Record Keeping: It provides a platform to input and store all your income and expense data electronically.
Categorisation: It helps you categorise your transactions correctly according to HMRC's requirements for Self Assessment.
Calculation and Summary: It aggregates your digital records to produce the figures needed for your quarterly updates, EOPS, and Final Declaration.
Digital Link to HMRC: It provides the secure digital link to transmit your summarised data directly to HMRC, fulfilling the MTD mandate.

Features to Look for in MTD Software

When selecting MTD-compatible software, consider these key features:

Automated bank feeds for transaction import
Intuitive categorisation of income and expenses
Generation and submission of quarterly updates
Support for End of Period Statements (EOPS)
Preparation of data for Final Declaration
Real-time tax liability estimates
Integration with accountants for seamless collaboration
Secure data storage and compliance with data protection laws
User-friendly interface and comprehensive support
Ability to handle multiple income sources (e.g., self-employment and property)

AccountsOS is designed specifically to meet these requirements, offering a comprehensive, user-friendly solution for MTD ITSA compliance.

Bridging Software vs. End-to-End Solutions

There are two main types of MTD-compatible software:

End-to-End Solutions (e.g., AccountsOS): These are comprehensive accounting software packages that handle all aspects of your digital record keeping, transaction categorisation, and direct submission to HMRC from within a single platform. They offer a streamlined workflow and often include additional features like invoicing, expense management, and financial reporting.
Bridging Software: If you prefer to keep your records in a spreadsheet, bridging software acts as an intermediary. It takes the summarised data from your spreadsheet and transmits it to HMRC in an MTD-compliant format. While offering flexibility for spreadsheet users, it requires careful maintenance of digital links between the spreadsheet and the bridging software.

For most sole traders, an end-to-end solution like AccountsOS provides the most integrated and error-free approach to MTD ITSA, reducing the administrative burden and ensuring compliance.

How to Prepare for MTD ITSA Now

Even if your MTD ITSA start date isn't until April 2026 or 2027, proactive preparation is key to a smooth transition. Starting early can help you understand the new processes, resolve any issues, and avoid last-minute stress.

1. Review Your Current Record-Keeping Practices

Take stock of how you currently manage your income and expenses.

Are you using paper receipts? Start digitising them by taking photos or scanning them immediately.
Do you use spreadsheets? Assess if they capture all the required details (date, type, amount) and consider how you will 'bridge' them to HMRC.
How often do you update your records? Get into the habit of recording transactions frequently, ideally weekly or even daily, rather than just once a year.

This review will highlight any gaps in your current system and help you identify areas that need improvement to meet MTD's digital requirements.

2. Adopt Digital Tools Early

The best way to prepare is to start using MTD-compatible software as soon as possible, even if you are not yet mandated.

Trial MTD Software: Sign up for a free trial of AccountsOS to familiarise yourself with digital record keeping, transaction categorisation, and reporting features.
Integrate Bank Feeds: Connect your business bank accounts to your software to automate transaction import, saving time and reducing errors.
Practice Quarterly Reporting: Use the software to generate informal quarterly summaries, even if you don't submit them to HMRC yet. This will help you understand the data requirements and reporting rhythm.

Early adoption allows you to iron out any issues and build confidence in the new system before it becomes mandatory.

3. Understand Your Income and Expenses

Familiarise yourself with what counts as business income and what expenses are allowable for tax purposes. While this hasn't changed with MTD, having a clear understanding will make categorisation easier.

Categorisation: Learn the common expense categories HMRC uses. AccountsOS often pre-categorises transactions to simplify this.
Proof of Purchase: Ensure you retain digital copies of all receipts and invoices.
Personal vs. Business: Be diligent in separating personal and business transactions, especially if you use a single bank account. A dedicated business bank account is highly recommended.

Accurate categorisation from the outset will save significant time and effort when preparing your quarterly updates and EOPS.

4. Seek Professional Advice

If you are unsure about any aspect of MTD ITSA, consult with an accountant or tax advisor. They can provide tailored guidance, help you choose the right software, and even manage your MTD submissions on your behalf.

An accountant can also help you determine if your gross income truly falls within the MTD ITSA thresholds, especially if you have complex income streams. AccountsOS facilitates seamless collaboration with your accountant, giving them direct access to your digital records.

Benefits and Challenges of MTD ITSA

Like any major tax reform, MTD ITSA brings both advantages and potential difficulties for sole traders and landlords. Understanding these can help you maximise the benefits and mitigate the challenges.

Benefits of MTD ITSA

Reduced Errors: Digital record keeping and direct submissions reduce manual errors, leading to more accurate tax returns. Real-time visibility can highlight issues earlier.
Real-Time Financial Overview: Quarterly updates provide a much clearer, more current picture of your business finances. This can aid in better business decision-making and cash flow management.
Better Budgeting for Tax: With regular updates, you will have a more accurate estimate of your tax liability throughout the year, allowing you to budget and set aside funds more effectively, avoiding year-end payment shocks.
Fewer Surprises: The continuous reporting means fewer last-minute rushes and less likelihood of discovering significant tax liabilities just before the annual deadline.
Improved Compliance: The structured digital process makes it easier to stay compliant with tax regulations, potentially reducing the risk of penalties.
Streamlined Administration: Once set up, MTD-compatible software can automate many aspects of record keeping, freeing up time for business owners.

Challenges of MTD ITSA

Initial Setup and Learning Curve: Transitioning to new software and digital processes can require an initial investment of time and effort to learn the system.
Increased Reporting Frequency: For those accustomed to annual reporting, the shift to quarterly updates and year-end submissions represents a significant increase in reporting frequency.
Cost of Software: While free options or trials exist, many comprehensive MTD-compatible software solutions come with a subscription fee, which is an additional business expense.
Digital Competence: Taxpayers who are less comfortable with technology may find the digital-only nature of MTD ITSA challenging, although HMRC offers support for those who are digitally excluded.
Maintaining Digital Links: For those using spreadsheets and bridging software, ensuring a robust "digital link" between systems can be complex and prone to errors if not managed carefully.
Potential for Increased Accountant Fees: While MTD aims to simplify, some businesses may initially incur higher fees if they rely on their accountant to manage the more frequent submissions. However, the long-term goal is efficiency gains.

AccountsOS aims to minimise these challenges by providing an intuitive, integrated platform that simplifies digital record keeping and automates submissions, turning the MTD ITSA challenge into an opportunity for greater financial control.

Penalties for Non-Compliance with MTD ITSA

HMRC has a robust penalty regime for non-compliance with MTD ITSA, designed to encourage timely and accurate submissions. It is crucial to understand these penalties to avoid unnecessary charges.

Points-Based Penalty System for Late Submissions

A new points-based system applies to late submissions of quarterly updates, End of Period Statements (EOPS), and the Final Declaration.

Late quarterly update: Points-based system (up to 4 points before penalty)
Late End of Period Statement: Points-based system
Late Final Declaration: Points-based system

Under this system, you receive a point each time you miss a submission deadline. Once you reach a certain number of points within a rolling period (e.g., 4 points for annual filers), a fixed monetary penalty is issued. The points accrue over a 12-month period and expire if no further points are accrued.

For MTD ITSA, with its multiple submissions, the accumulation of points can happen more quickly if deadlines are consistently missed.

Penalties for Late Tax Payments

Separate penalties and interest apply for late payments of your tax liability. These largely mirror the penalties under the traditional Self Assessment system.

Late tax payment: Interest and fixed penalties (e.g., 5% after 30 days, 5% after 6 months, 5% after 12 months)

Interest is also charged on any unpaid tax from the day it becomes due until it is paid. This interest rate is typically the Bank of England base rate plus 2.5%, compounding daily.

Penalties for Inaccurate Records

If HMRC discovers errors in your records or submissions that lead to an underpayment of tax, you could face penalties for inaccuracies.

Inaccurate records: Penalties for errors up to 100% of the tax due

The level of penalty depends on the 'behaviour' that led to the error (e.g., careless, deliberate but not concealed, deliberate and concealed) and whether you proactively disclosed the error to HMRC. Penalties can range from 0% (if reasonable care was taken) up to 100% of the additional tax due.

Mitigation: Taking reasonable care and correcting errors promptly can significantly reduce or even eliminate penalties. Using MTD-compatible software like AccountsOS helps ensure accuracy and provides a clear audit trail.

Working with an Accountant under MTD ITSA

For many sole traders and landlords, an accountant is an invaluable partner in managing tax affairs. Under MTD ITSA, the role of the accountant evolves, becoming even more integrated with your day-to-day record keeping.

The Evolving Role of Accountants

Traditionally, accountants often received a shoebox of receipts or a spreadsheet at year-end. With MTD ITSA, this approach is no longer viable. Accountants will need access to your digital records much more frequently to:

Review and verify your quarterly updates before submission.
Advise on proper categorisation and allowable expenses throughout the year.
Prepare and submit your End of Period Statements, applying complex accounting adjustments and capital allowances.
Finalise your overall tax position through the Final Declaration.
Provide real-time tax planning advice based on your current financial data.

This shift means a more collaborative, continuous relationship between you and your accountant, moving from reactive year-end processing to proactive, ongoing tax management.

How AccountsOS Facilitates Collaboration

AccountsOS is designed to make working with your accountant under MTD ITSA seamless and efficient.

Shared Access: You can grant your accountant secure access to your AccountsOS account, allowing them to view your digital records, review transactions, and make necessary adjustments directly.
Real-Time Data: Your accountant has access to your up-to-date financial data at any time, eliminating the need to send files back and forth. This ensures they have the most current information for advice and submissions.
Streamlined Review: AccountsOS provides clear dashboards and reports that your accountant can use to quickly review your quarterly data, identify discrepancies, and ensure everything is MTD-compliant.
Support for Complex Adjustments: AccountsOS helps compile the initial data for EOPS, which your accountant can then use to apply detailed accounting adjustments and finalise your tax position.
Audit Trail: All changes and submissions are logged, providing a clear audit trail for both you and your accountant, which is valuable for compliance and HMRC enquiries.

By using AccountsOS, you empower your accountant to provide higher-value services, moving beyond mere compliance to strategic financial advice that helps your business grow.

Advanced Considerations: Going Limited as an Alternative

With the advent of MTD ITSA, some higher-earning sole traders are reconsidering their business structure. The administrative burden of MTD ITSA, particularly for those with complex affairs, leads many to explore the benefits of incorporating as a limited company.

MTD ITSA vs. Corporation Tax: A Comparison

While MTD ITSA introduces quarterly reporting for sole traders, limited companies already have a different tax regime: Corporation Tax (CT).

Feature	Sole Trader (MTD ITSA)	Limited Company (Corporation Tax)
Tax Type	Income Tax (on profits)	Corporation Tax (on company profits), then Income Tax/Dividends Tax (on personal drawings)
Reporting Frequency	4 quarterly updates + EOPS + Final Declaration	Annual CT600 return (filed 12 months after year-end)
Digital Requirements	Mandatory digital record keeping & MTD submissions	Digital record keeping common, MTD for CT planned but not yet mandated
Tax Rates (2026/27 est.)	20%, 40%, 45% (Income Tax)	19% (profits up to £50k), 19-25% (marginal), 25% (profits over £250k) + personal tax on drawings
Liability	Unlimited personal liability for business debts	Limited liability (personal assets protected)

When "Going Limited" Might Be a Smarter Move

As highlighted by some tax professionals, for certain sole traders, incorporating a limited company might indeed become a "smarter move" given the MTD ITSA changes.

Reduced Reporting Frequency for Company Tax: While you still have personal tax to report (salary, dividends), the company itself only files its CT600 annually, potentially simplifying the business's direct tax reporting compared to MTD ITSA's six submissions.
Tax Efficiency: For higher earners, the combination of Corporation Tax rates (especially the small profits rate) and strategic extraction of profits via salary and dividends can sometimes lead to a lower overall tax burden than paying higher rate Income Tax as a sole trader.
Limited Liability: This remains a primary benefit, offering personal asset protection from business debts and legal claims.
Perception and Growth: A limited company can present a more professional image to clients and suppliers, and it can be easier to raise finance or sell the business in the future.

Important Consideration: Incorporating a limited company introduces new administrative duties, such as filing annual accounts with Companies House, running a payroll, and adhering to company law. It also means you need to manage both company and personal tax. This decision should always be made in consultation with a qualified accountant who can assess your specific circumstances and advise on the most tax-efficient and administratively appropriate structure for your business.

AccountsOS supports both sole traders navigating MTD ITSA and limited companies managing their Corporation Tax, providing flexible solutions regardless of your business structure.

AccountsOS and MTD ITSA Compliance

AccountsOS is built from the ground up to help sole traders and landlords effortlessly comply with HMRC's Making Tax Digital for Income Tax Self Assessment (MTD ITSA) requirements. Our platform simplifies the entire process, turning a complex obligation into a straightforward task.

Digital Record Keeping

Effortlessly record income and expenses as they happen, ensuring all transactions are MTD-compliant.

Automated Quarterly Updates

Generate and submit your quarterly income and expenditure summaries directly to HMRC with ease.

Real-Time Tax Estimates

See your estimated tax liability update throughout the year, helping you budget and avoid surprises.

Deadline Reminders

Receive timely notifications for all MTD ITSA submission and payment deadlines, keeping you on track.

EOPS and Final Declaration Support

AccountsOS helps compile the necessary data for your End of Period Statement and Final Declaration.

Seamless Accountant Collaboration

Grant your accountant access to your digital records, making year-end adjustments and advice simpler.

With AccountsOS, you gain confidence that your digital records are accurate, your quarterly updates are submitted on time, and your year-end declarations are prepared correctly. We empower you to focus on your business, not on complex tax compliance.

Frequently asked questions

What is the income threshold for MTD ITSA?

From April 2026, sole traders and landlords with gross income over £50,000 must comply. This threshold will reduce to £30,000 from April 2027.

When do I need to start with MTD ITSA?

If your qualifying income is over £50,000, you'll need to start for the tax year beginning 6 April 2026. Your first quarterly update for 2026/27 will be due by 7 August 2026.

What are quarterly updates?

These are summaries of your business income and expenses submitted to HMRC four times a year. They replace parts of the traditional annual Self Assessment return.

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

The annual Self Assessment tax return is being replaced by the quarterly updates, an End of Period Statement (EOPS), and a Final Declaration under MTD ITSA. You will no longer file a single SA800 form.

What if my income falls below the threshold after I've started?

If your income consistently falls below the threshold, you may be able to opt out of MTD ITSA. However, you must inform HMRC and ensure you meet the criteria for exemption.

Can I use spreadsheets for MTD ITSA?

Yes, you can use spreadsheets, but they must be 'bridged' to HMRC's systems using MTD-compatible software. This means the spreadsheet cannot be submitted directly; data must be transferred digitally.

What are the penalties for not complying with MTD ITSA?

HMRC operates a points-based penalty system for late submissions of quarterly updates, EOPS, and Final Declarations. Fixed penalties and interest also apply for late tax payments.

How does MTD ITSA affect my tax payment dates?

MTD ITSA changes how you report income, but generally does not change the dates by which you pay your tax. Payments on Account and balancing payments will still be due on 31 January and 31 July as per the traditional Self Assessment system.