What is Making Tax Digital for Income Tax — and does it affect you?

What is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax (MTD ITSA, or MTD for IT) is a government initiative that changes how self-employed sole traders and landlords report their income to HMRC. Instead of filing one annual Self Assessment return, you'll be required to:

• Keep digital records of your income and expenses
• Submit quarterly updates to HMRC throughout the year
• File a final declaration at the end of the tax year

All of this must be done through HMRC-recognised software — spreadsheets and paper records alone won't be enough.

Who does it affect?

MTD for Income Tax applies to self-employed sole traders and landlords whose gross income exceeds certain thresholds. HMRC is rolling it out in phases:

Note that these thresholds are based on gross income — that's your total income before any expenses are deducted, not your profit.

What are quarterly updates?

Under MTD, you'll need to submit a summary of your income and expenses to HMRC four times a year. The quarters follow the tax year (6 April to 5 April), so the deadlines are:

• Quarter 1: 6 April – 5 July → submit by 5 August
• Quarter 2: 6 July – 5 October → submit by 5 November
• Quarter 3: 6 October – 5 January → submit by 5 February
• Quarter 4: 6 January – 5 April → submit by 5 May

These updates are not tax returns — you won't need to pay tax at each quarter. They're a running summary of your figures so HMRC can see how your year is progressing. Your tax liability is still calculated and paid at the end of the year.

What counts as digital record keeping?

HMRC requires you to record every transaction digitally. That means noting:

• The date of each sale or purchase
• The amount (in pounds sterling)
• A description or category of what the transaction relates to

The records must be kept in software that is compatible with MTD. You can use accounting software, a bridging tool, or a dedicated app like Bart that connects directly to HMRC.

Does Self Assessment go away?

Not entirely. The traditional Self Assessment tax return is replaced by the MTD process for those within scope. Instead of filing one big return each January, you'll:

1. Submit four quarterly updates during the year
2. File an End of Period Statement (EOPS) to confirm your figures are correct
3. Submit a Final Declaration (the equivalent of a tax return) by 31 January

If you have other income sources — such as employment, dividends, or savings interest — you'll still need to declare those in your Final Declaration.

What happens if I don't comply?

HMRC is introducing a new points-based penalty system for MTD. You'll accumulate a point each time you miss a filing deadline. Once you reach a threshold (four points for quarterly filers), you'll receive a £200 fine — and further fines for each subsequent miss.

The key takeaway: missing a quarter is a bigger deal under MTD than missing the old January deadline, so staying on top of your submissions is important.

What do I need to do?

If you're affected from April 2026, here's what to do now:

1. Check your eligibility — add up your gross income from self-employment and/or property. If it's over £50,000, you're in scope from April 2026.
2. Sign up for MTD for Income Tax — you'll need to do this through HMRC's online service or through compatible software before the deadline.
3. Choose your software — you need an HMRC-recognised tool to submit your updates. Bart handles everything: open banking feeds, expense categorisation, quarterly submissions, and your Final Declaration.
4. Start keeping digital records — from the first day of the tax year (6 April 2026), your records must be digital.

Frequently asked questions