Making Tax Digital for Income Tax
From April 2026 HMRC are introducing mandatory digital quarterly updates and digital tax return submissions for individuals receiving income from self-employment and/or property.
MTD for ITSA will be introduced in three phases, with individuals earning over £50,000 from “qualifying income” (from self-employment and/or property) mandated to start from April 2026. This will then be extended to include individuals earning over £30,000 from April 2027 and individuals earning over £20,000 from April 2028.
No changes are being made to the annual tax return format or deadline, and the payment deadlines, which remain the same.
Once mandated to be included, or signed up voluntarily, individuals will be required to submit four quarterly updates each year in addition to their annual tax return, all of which must be submitted using appropriate software. The quarterly updates will report only on income and expenses relating to self-employment and/or property. The annual return will then be prepared as usual, using the quarterly updates as a basis for the final self-employment and property totals on the tax return. Final adjustments to the quarterly submitted totals can be made in the annual tax return. The annual return must also be submitted using appropriate software.
Mandated Inclusion
You are mandated to start using MTD for ITSA if all of the following apply:
You are an individual registered for Self-Assessment
You receive income from self-employment and/or property
Your turnover (gross income) from qualifying income is on or over the threshold in the tax year.
Mandated inclusion for April 2026 is based on your 2024-2025 tax return. If you submit a tax return with qualifying income over £50,000 for 2024-2025 you must start recording your income and expenses digitally from April 2026. The first quarterly update will be due for the period 06 April to 05 July 2026, with a filing deadline of 05 August 2026.
To calculate your qualifying income total, you include the following income stream totals for the year:
Self-employed income
UK property income
Overseas property income.
Other income, such as dividends, employment income, or pensions, are not included.
A new penalty scheme is also being introduced for late Self-Assessment filings. Penalty points will be issued for late quarterly updates, with a financial penalty issued after you reach 4 penalty points. It’s therefore important that you make sure you are registered for MTD, and have appropriate software and records in place, in time to prepare and submit your first mandated update.
Once you are mandated to start using MTD, you can only leave after you have submitted three annual tax returns where the qualifying income is under the threshold for that year.
Signing up to MTD for ITSA
Your accountant, tax agent or bookkeeper can register you for MTD and submit the quarterly updates for you, or you can sign up and submit them yourself. For more information you can check the HMRC guidance here or contact us about getting registered and choosing the right software.
Going Digital - What we can offer and how we can help
Many providers are offering MTD-compatible software. You will need to decide and budget for your software, whichever package you go for. Please get in touch if you would like to discuss how MTD will affect you and how we can help you go digital. We may be able to offer a suitable online accounting software for your bookkeeping.
We can also offer Dext. This add on app can be used to scan any receipts and post to your online accounting package, and together with your accounts software provides a comprehensive digital solution for your records.
We will be running live webinars as we get nearer to the introduction date to help you get started and take you through to becoming an expert, so don’t forget to keep an eye out for our Live sessions.
“Making Tax Digital (MTD) will exploit the opportunities offered by digitalisation to make it easier for everyone to get tax right. Many other countries have already done this or have digital systems in development.”
What are the advantages of going digital?
Digital accounting software has significant advantages over the traditional ways of bookkeeping.
You can:
• See a clear picture of your current financial position, in real-time
• Have your bank feed your data directly into your accounts on a DAILY basis
• Take a photo on your phone of a purchase invoice and have it posted automatically
• See your profit, monies owed and your business bank balance 24/7 from your phone
• Create and send invoices easily on the go and make sure you are paid on time
• Track your sales and purchases, debtors and creditors, and manage your suppliers
• Estimate your tax payments so you are prepared
• Easy tax filing that matches HMRC requirements for MTD
• Plan for your tax bill by making tax part of your day to day recordkeeping
• Keep on top of your cashflow so you can budget effectively
• Create estimates, purchase orders and manage your stock
• Discard your paperwork to save space and help the environment!