Making Tax Digital for Income Tax: a useful guide

For small business owners and the self-employed, staying on top of changes to tax filing requirements is crucial. Getting the right MTD-compliant software in place and preparing ahead of time makes filing your returns and paying your taxes quick and easy, helping to manage your finances so your cash flow isn’t impacted.

More importantly, it means you can avoid potentially costly penalties for noncompliance.

With Making Tax Digital (MTD), HMRC is rolling out the biggest change to the tax system in a generation. The scheme aims to make the UK’s tax system fully digital over the next few years. MTD for VAT rolled out for businesses with annual turnover above £85,000 from April 2019, and extended to all VAT-registered businesses, regardless of turnover, from April 2022.

Next in line: MTD for Income Tax (MTD for ITSA). The programme is set to make significant changes to how some of those registered for Self-Assessment file their taxes. In this article, we’ll tell you everything you need to know about the new Making Tax Digital Self Assessment scheme, from what it is and who it affects to how to sign up and what software you’ll need.

Download our simple guide here.

What are the changes to Making Tax Digital for Income Tax Self-Assessment?

For those eligible, the MTD for Income Tax  Self-Assessment (ITSA) will replace the current requirement to file an annual Self-Assessment tax return. Instead, you’ll use software to keep digital records and file updates at least every quarter via MTD compatible software to HMRC.

MTD for Income Tax is set to roll out from April 2026, and will cover all unincorporated business and landlords for Self Assessment with annual business and/or rental income over £50,000. Businesses with an income between £30,000-£50,000 have until April 2027.

If your income is below £30,000, you can continue using the existing Self-Assessment system for the time-being. However, the government is putting in place plans on how MTD can best be used for these smaller businesses.

The government aims to increase the accuracy of the returns with this new system, making it easier to get taxes right and saving time and money - for both HMRC and the individuals and businesses affected.

Under MTD for ITSA, you’ll be required to:

• Keep digital records and use compatible software to submit quarterly information to HMRC, or use bridging software to connect spreadsheets

• Report your financial data to HMRC at least every quarter

• Finalise your taxes at the end of your accounting period and submit a final declaration

The scheme is also known as Making Tax Digital for Income Tax Self Assessment, or MTD for ITSA. You can learn more about the overall Making Tax Digital initiative on the government’s website. 

How to sign up for Making Tax Digital for Income Tax Self-Assessment

If you’re eligible for MTD Income Tax Self-Assessment, you’ll need to sign up with HMRC before the scheme becomes mandated in April 2026 for incomes over £50,000 and April 2027 for incomes over £30,000.

Before you can sign up, you’ll need the following information: 

• Your business name and start date (or the date you started collecting property income) 

• Your email address

• Your accounting period and accounting type (eg. cash or standard accounting) 

• Your National Insurance number

• The Government Gateway user ID and password that you use to file Self-Assessment tax returns 

Once you have all this information, you’re ready to sign up. The first thing you need to do is get HMRC-recognised functional compatible software (more on this below).

Once you’ve signed up for Making Tax Digital on the government website, you’ll need to authorise your software. You’ll be able to start using the new system as soon as you’re registered and authorised. 

If you’re an agent signing up on behalf of your client, you’ll need to follow a slightly different process. You can also see our guide to MTD ITSA for accountants to learn more. 

Who does Making Tax Digital for Income Tax Self-Assessment affect?

The Making Tax Digital Income Tax Self-Assessment scheme will affect you if: 

• You’re an unincorporated business or a landlord

• Your total gross income is more than £50,000 a year from your self-employed income and/or rental properties from April 2026

• Your total gross income is more than £30,000 a year from your self-employed income and/or rental properties from April 2027

For example, if you owned and operated three businesses, each with an income of £11,000, you will be eligible for Making Tax Digital and will need to register for MTD for ITSA by April 2027, or by April 2026 if your income is more than £50,000. 

Similarly, if you owned and operated a single business with an income of £27,000 and then had an extra income of £4,000 from a property you let, you will need to use Making Tax Digital  for Income Tax Self-Assessment by April 2027.

At present, you’ll be exempt if you: 

• Are in a partnership with any partners which are not individuals

• Are in an LP or LLP 

• Make your Self Assessment money from trusts or deceased estates

• Earn less than £50,000 taxable income (April 2026) or less than £30,000 (April 2027)

These exemptions are temporary, and HMRC aims to roll out Making Tax Digital to cover all areas of the tax system. 

There are provisions for being considered digitally exempt, but these only apply in very limited circumstances. You will need to apply for exemption to HMRC, which is only granted in some circumstances. Each application is reviewed on an individual basis.

What’s the Making Tax Digital for Income Tax Self-Assessment threshold?

The current threshold for Making Tax Digital Self Assessment dictates that you must sign up for Self Assessment if you’re a partner in a business partnership, an unincorporated  landlord or a self-employed sole trader. 

While all partners must complete a return, sole traders and/or landlords only need to if their annual turnover is higher than £1,000.

Others who may need to sign up to complete a Self Assessment are those with other untaxed income, such as: 

• Those with income from tips and commissions

• Those with income from savings, investments and dividends

• Those with untaxed foreign income 

Not everyone who meets the current Self Assessment threshold will be included in MTD ITSA from April 2026. The scheme will only cover you if you are an unincorporated business or a landlord with a qualifying income of £50,000 or more. From April 2027, you will need to register if your qualifying income is more than £30,000. You can use the gov.uk guide to see if you qualify. 

Note: The £50,000 threshold refers to your gross income from all businesses and/or rental properties. You will still be eligible for MTD ITSA even if none of your individual sources of gross income generates you £50,000 or more in any given year.

Making Tax Digital for Income Tax for Self-Assessment: quarterly reports

Under the current Self Assessment system, you must complete a single return before the end of the tax year. You enter your income and expenses manually, and HMRC will then calculate how much you owe. 

Under Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA), this process will change significantly. The manual reporting process will be replaced and, instead, businesses must use MTD-compatible software to submit their financial information, or convert their records into digital form, which will then be regularly sent to HMRC.

This software will also be able to keep digital records, which is a requirement for MTD for ITSA.

Over the course of the tax year, you must submit summary reports to HMRC at least every quarter. 

These reports don’t need to include accounting or tax adjustments, although you’re free to include these if you wish to. This means the quarterly submission does not have to be 100% up-to-date.

Each quarterly report is due within one month and seven days after the quarter ends.

The reasoning behind this change is to make it easier to spot and rectify errors in as close to real time as possible, rather than waiting for issues to show up at the end of the tax year, which could leave you feeling stressed while you find a solution.

Note: You must record and submit quarterly reports for each separate trade and/or property business you manage. The £50,000 threshold applies to you as an individual taxpayer, but the reporting requirements apply to each business separately.

Making Tax Digital for Income Tax for Self-Assessment: end of period statements

In addition to quarterly reports, Making Tax Digital Self-Assessment requires you to make an end of period statement (EOPS) at the end of each year. This must include all relevant accounting and tax adjustments, and will finalise your position for the end of the year.

This is when you must make any accounting adjustments and claim any reliefs that you didn’t include in your quarterly reports. You’ll also need to confirm the accuracy of any earlier reports.

While this may seem like a lot to remember, MTD compliant accounting software means you’ll be able to automatically generate quarterly reports and statements, leaving you free to focus on your business services and products.

What is the Making Tax Digital for Income Tax for Self-Assessment final declaration?

In MTD for ITSA, the final declaration is the final reporting requirement.  This is when you report any additional income and expenses that you would previously have included in your Self Assessment return. 

The final declaration is used to finalise your position for the end of the year and calculate your overall tax liability. This, in effect, replaces your annual Self Assessment return.

It is also where you must submit quarterly reports and an EOPS for each of your businesses. In essence,the final declaration is a summary of your overall personal position. 

Who completes the Making Tax Digital for Income Tax Self-Assessment quarterly reports, EOPS and final declaration?

Just as with Self Assessment, business owners and the self-employed are under no obligation to complete their own MTD statements - they are responsible for the submission, but can authorise an agent (such as an accountant) to act on their behalf.

The process is complicated, and there’s a lot to keep track of. Using the right software can make fulfilling MTD requirements easy, but you might still find you benefit from the experience and additional services an accountant can offer. Take a look at our accountant directory to find an accountant or bookkeeper near you.

If you already have an accountant to maintain your financial records or complete your tax returns, they can sign you up for MTD for ITSA and ensure your reports are filed correctly and on time. 

In addition to specialist knowledge, accountants can share their own knowledge and may have experience with Making Tax Digital through the MTD for VAT scheme that began in 2019. If so, they’ll likely be able to help you avoid mistakes and pitfalls.

When do I pay tax under Making Tax Digital for Income Tax for Self-Assessment?

All eligible businesses must comply with MTD requirements for the first tax year beginning in April 2026 (if your income is above £50,000, or April 2027 if your income is above £30,000). 

This is good news for business owners, as it gives you more time to get your head around the new system and get set up with the right software. 

You should note, however, that the different reporting requirements mean you won’t be able to wait until the end of the 2026-27 tax year to fulfil your Making Tax Digital obligations.

Remember, from 5 August 2026, you must submit at least quarterly reports every three months throughout the tax year, before submitting your EOPS and final declaration at the end of the tax year. You’ll also need to keep digital records.

For an accounting period that matches the 2026-27 tax year, your deadlines would be as follows: 

• 1st quarter (6 Apr to 5 Jul) is due 5 August 2026

• 2nd quarter (6 Jul to 5 Oct) is due 5 November 2026

• 3rd quarter (6 oct to 5 Jan) is due 5 February 2026

• 4th quarter (6 jan to 5 Apr) is due 5 May 2026

• 31 January 2027: End of Period statement (EPOS) and final declaration due 

The deadline for payment of the previous year’s tax is the same as it is under the current Self Assessment system: 31 January.

You may also be required to make a payment on account toward the current year’s tax. This will be due by 31 July.

What’s the difference between Self Assessment and Making Tax Digital for Income Tax for Self-Assessment? 

The core differences between the old Self Assessment and Making Tax Digital for Income Tax Self Assessment systems concern record-keeping and reporting requirements. 

To summarise, MTD requires you to: 

• Keep records in digital form 

• Submit quarterly reports an EOPS for each business

• Submit a final declaration at the end of the year 

As noted above, the final declaration is functionally very similar to the current Self Assessment return. 

Will Making Tax Digital for Income Tax Self-Assessment replace Self Assessment?

The government's aim with MTD is to roll it out across the UK tax system. In practice, then, MTD for Income Tax for Self-Assessment will replace Self Assessment for most of those who currently use the Self Assessment scheme. 

However, Self Assessment isn’t being scrapped entirely. Those with income below £30,000 will not yet be covered by MTD ITSA. 

Other groups, such as partnerships with non-individuals or income from trusts or deceased estates, will not be mandated from April 2026. 

You should also note that if you’re registered for Self Assessment before making the switch to MTD, you will still need to complete a Self Assessment return for the tax year before you sign up for MTD. 

How long do I need to keep old accounting records?

You must keep your MTD for Income Tax for Self-Assessment accounting records for at least five years. 

QuickBooks’ accounting software is especially useful in this respect, as it can use cloud storage to ensure your data won’t be wiped out if your hardware is corrupted, lost or stolen.

Note: There are different requirements for very late returns. If you send your records more than four years after the deadline, you must keep them for another 15 months after you send off your return.

Making Tax Digital for Income Tax Self-Assessment pilot  

If you want to sign up for MTD ITSA before its implementation in April 2026, HMRC is running a pilot. 

The scheme is completely voluntary and is open to those who meet the following criteria: 

• Resident of the UK 

• Registered for Self Assessment

• Either sole traders with income from only one business and/or landlords who rent out UK property or both 

You also need to be up to date on your payments to HMRC and not have claimed any Covid support payments.

What software can I use for Making Tax Digital for Income Tax Self-Assessment?

It’s crucial to understand the reporting requirements for MTD ITSA, as you can’t sign up without digitally linked record-keeping. This is the only type of software you can use for Making Tax Digital for Income Tax Self-Assessment. 

Making Tax Digital rules require that all data be ‘digitally linked’. This means that any transfers of data from one program to another must occur digitally. Doing this ensures there’s a clear digital trail from your initial recording of the data all the way to your reports. 

There are two ways to comply with this requirement: 

• Use functional compatible software to record and report your data in HMRC-approved form 

• Use bridging software to link your accounts and data to HMRC-approved software 

We’ll explain both below.

Functional compatible software 

Using functional compatible software from the outset is the easier and safer way to get ready to comply with Making Tax Digital for Income Tax (ITSA) filing requirements once they become mandatory. 

‘Functional compatible software’ is HMRC’s term for software that is compatible with Making Tax Digital. 

This includes systems like QuickBooks, which allow you to keep your income and expenses in HMRC-approved digital form. 

Once you’re signed up for MTD, these programs will automatically generate and send quarterly reports and end of period statements. 

In many cases, enabling these functions is as easy as checking a box.

Spreadsheets and bridging software 

You will still be able to use spreadsheets or other software to keep digital records under Making Tax Digital for Income Tax - but the way you use them will change. 

The crucial thing to understand here is digital links. Under the digital linking rules, manual transfers of data will not be allowed. This means that it’s illegal to type data from your spreadsheets into your accounting software to send to HMRC - even if you’re copying and pasting the data from one program to another. 

You’ll need to use bridging software to import the contents of your spreadsheets to your reporting software.

This is a more complicated and involved process than just using functional compatible software from the start, and one that doesn’t really bring you any benefits.

On top of these concerns, spreadsheets carry higher risks of data insecurity, where a single mistyping can erase a crucial value or formula. This is especially important when you remember that MTD requires you to keep all records for five years. 

Your record-keeping processes will be safer and more secure if you use functional compatible software from the outset.

How do I get software for Making Tax Digital for Income Tax for Self-Assessment?

Whether you go for bridging software or use functional compatible software from the start, the responsibility for getting and using the correct software lies with you.

The government has said that it expects that some free software will be available for a limited criteria of circumstances before MTD for Income Tax is mandated in April 2026, but buying MTD-compatible software to keep digital records is considered a legitimate business expense.

Making Tax Digital for Income Tax Self Assessment marks a major change to how and how often you file your taxes. It covers both how you keep your records and how you submit your return, with significant implications for the way you submit returns and keep digital records. 

At the same time, it can offer opportunities, allowing you to streamline your business by closely linking your bookkeeping and taxes. 

The quarterly reporting requirements can also help give you a clearer picture of your finances across the whole year, allowing you to be better prepared when tax time rolls around.

Disclaimer: The information in this guide is provided free of charge, for information purposes only and is intended to be helpful to a wide range of businesses. Because of its general nature, the information cannot be taken as comprehensive and does not constitute - and should never be used as a substitute - for legal or professional advice. We cannot guarantee that the information applies to the individual circumstances of your business. Intuit does not have any responsibility for updating or revising any information presented herein. Viewers should always verify statements before relying on them.

Ready to start your own business?

If you’re feeling empowered to start your own sustainable small business, you can get started with our start your own business checklist. It’s all part of our mission to help small businesses grow.