Summary
Making Tax Digital for Income Tax (MTD for ITSA) Phase 2 is now live: self-employed individuals and landlords earning over £50,000 must keep digital records and submit quarterly updates to HMRC. The £30,000 threshold follows in April 2027.
What Is Making Tax Digital?
Making Tax Digital (MTD) is HMRC's programme to move the UK tax system entirely online — requiring businesses and individuals to keep digital records and submit tax information using compatible software rather than annual paper or web-form returns.
Phase 1 — MTD for VAT — has been in effect since 2019 and is now mandatory for all VAT-registered businesses. Phase 2 extends the requirement to Income Tax for self-employed individuals and landlords under MTD for Income Tax Self Assessment (MTD for ITSA).
This is a significant change to how self-employed people and landlords report their income to HMRC — replacing the annual self-assessment return with quarterly digital submissions plus an end-of-period statement.
Who Is Affected and When?
HMRC is rolling out MTD for ITSA in stages based on income level:
| Date | Who must comply |
|---|---|
| April 2026 | Self-employed and landlords with qualifying income over £50,000 |
| April 2027 | Self-employed and landlords with qualifying income over £30,000 |
| TBC | Those with income over £20,000 (date to be confirmed by HMRC) |
"Qualifying income" means the combined income from self-employment and property in the tax year. Employed income does not count towards the threshold, but if you are also self-employed or a landlord with additional income, that portion will be assessed.
Partnerships are currently excluded but HMRC has indicated they will be brought into scope in a future phase.
What Exactly Changes?
Under MTD for ITSA, the current annual self-assessment return is replaced by a new reporting cycle:
Quarterly Updates
You (or your accountant) submit a summary of income and expenses to HMRC four times a year — within one month of each quarter end. No tax is payable at this stage; it is purely a reporting obligation.
End-of-Period Statement (EOPS)
At the end of the tax year, you finalise each source of income (e.g. self-employment, property) with any adjustments, reliefs, and allowances claimed.
Final Declaration
Replaces the current self-assessment return. You confirm all income sources are accurate and your overall tax liability is crystallised. This must be submitted by 31 January following the tax year-end.
Digital Record-Keeping Requirements
You must use HMRC-recognised software to keep digital records of all business income and expenses. Spreadsheets alone are not sufficient — you need software with a direct API connection to HMRC's systems (known as "bridging software" links are also available for spreadsheet users, but a fully integrated platform is strongly recommended).
Compatible software includes:
We help clients set up and migrate to the right platform for their business — and manage the quarterly submissions on their behalf.
What Are the Penalties for Non-Compliance?
HMRC is introducing a new points-based penalty system for late MTD submissions:
Points expire after a period of compliance. Late payment of tax continues to attract the existing interest and surcharge regime.
How We Help You Prepare
MTD for ITSA requires a fundamentally different way of working with your accountant — quarterly rather than annual. We make this transition straightforward:
- →Software setup and migration — we configure your Xero, QuickBooks, or preferred platform
- →Quarterly submission management — we collate, review, and submit each quarterly update on your behalf
- →Year-end finalisation — end-of-period statements and final declaration prepared and filed
- →Tax planning throughout the year — quarterly visibility enables proactive planning rather than year-end surprises
- →HMRC correspondence — we handle any queries or notices from HMRC
If you are now within MTD for ITSA scope and have not yet taken steps to comply, get in touch now — we can get you set up on compatible software and bring submissions back into line before penalties accrue.