Making Tax Digital for Income Tax: the complete guide

Making Tax Digital for Income Tax (MTD ITSA) is the biggest change to how the self-employed and landlords report tax in a generation. It replaces the once-a-year Self Assessment return with digital records and four updates a year. The first people are mandated from April 2026— this guide explains who's in, when, and exactly what you'll have to do.

What MTD for Income Tax actually is

MTD ITSA has three moving parts: you keep digital records of business income and expenses in compatible software, you send quarterly updates of your running totals to HMRC, and after the tax year ends you submit a Final Declaration that finalises everything and replaces the old SA100. The 31 January payment date and payments on account don't change — only how you report.

When it starts — and who is in scope

It's phased in by income level, measured from the tax return due the January before each start date:

What counts as qualifying income

This is the figure that decides whether you're in. Qualifying income is your gross self-employment (trading) income plus your gross UK and overseas property income — before deducting any expenses. Multiple trades and properties are added together.

Who is exempt

• Automatic exemption (no application) for Lloyd's underwriters and ministers of religion who filed the relevant pages in 2024-25.
• Digitally excluded people can apply — for example if age, disability or location makes digital record-keeping impractical, or it conflicts with religious beliefs.
• Partnerships are not yet mandated; their entry is deferred to a later, unconfirmed date.

What you have to do

1. Keep digital recordsRecord income and expenses as you go in MTD-compatible software (or a spreadsheet linked by bridging software). No more shoebox of receipts in January.
2. Send four quarterly updatesEach update is a cumulative, year-to-date summary of income and expenses for each business — a few clicks, not a full return.
3. Submit a Final DeclarationAfter the tax year ends, finalise all your income (including employment, savings and dividends), claim reliefs, and confirm the figures. This replaces the SA100.

Quarterly update deadlines

The standard tax-year quarters and their deadlines are fixed:

You can elect to use calendar quarters (1 April–30 June, and so on) instead, before your first submission for the year — the 7th-of-the-month deadlines stay the same.

The Final Declaration replaces your tax return

For anyone in scope, the annual SA100 disappears. In its place, the Final Declaration — due by 31 January after the tax year, as before — pulls together your business figures and all your other income, applies reliefs and allowances, and is the point at which you confirm the return is complete. Your tax is still due on 31 January, with payments on account in January and July where they apply.

The new penalty regime

MTD brings a points-based system that's more forgiving of one-off slips but bites if you're repeatedly late.

Late payment works separately: nothing if you pay within 15 days, then escalating charges from day 15 and a further penalty accruing daily from day 31. There's a soft landing for the first year, with no points for early quarterly slips for April-2026 joiners.

A worked timeline

Asha is a sole trader with £60,000 of gross trading income in 2024-25 — over £50,000, so she's mandated from 6 April 2026. Her year looks like this: keep digital records throughout; file Q1 by 7 Aug 2026, Q2 by 7 Nov 2026, Q3 by 7 Feb 2027, Q4 by 7 May 2027; then submit her Final Declaration by 31 January 2028, paying her balancing payment and first 2027-28 payment on account that day.