Making Tax Digital for Income Tax 2026: What Self-Employed Workers Must Do Now

What Is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is HMRC's programme to modernise how the self-employed and landlords report their income and expenses. Instead of submitting one annual tax return, you now report income and expenses four times per year (quarterly), plus a final year-end declaration.

MTD ITSA does not change how tax is calculated or when tax is due. Income Tax, Class 4 NI, and Payments on Account are calculated and paid on the same dates as before. What changes is the reporting frequency and the requirement to use approved digital software.

Who Must Comply in April 2026?

MTD ITSA applies to you from 6 April 2026 if your combined qualifying income from self-employment and/or UK property (rental income) exceeds £50,000 per year.

Qualifying income is your gross income (before expenses). If your gross self-employment turnover is £55,000 but your profit is only £30,000 after expenses, the £55,000 gross figure still triggers MTD.

Full MTD ITSA Rollout Timeline

What Actually Changes: The Quarterly Reporting Cycle

Under MTD ITSA, your year is divided into four quarters. At the end of each quarter, you submit a quarterly update through your MTD software showing your income and expenses for that period. HMRC uses this to give you an estimated in-year tax position.

The quarterly updates are essentially a digital summary of income and allowable expenses for that three-month period. You are not required to keep HMRC updated in real-time — just submit by each quarterly deadline.

The 31 January Deadline Still Exists

Under MTD ITSA, you still need to make a Final Declaration by 31 January (formerly the Self Assessment deadline). This replaces the old annual tax return and allows you to add any income sources not covered by quarterly updates (such as investment income, or claims for reliefs). The payment deadlines for income tax and Payments on Account are also unchanged.

MTD-Compatible Software: What You Need

You must use HMRC-approved MTD-compatible software to submit your quarterly updates and Final Declaration. You cannot use HMRC's free online service for MTD ITSA — you need third-party software.

HMRC maintains a list of approved providers at gov.uk/guidance/find-mtd-software. Popular options include:

• Xero, QuickBooks, FreeAgent — full accounting packages, suitable for complex businesses
• TaxCalc, Sage, Coconut — simpler options for sole traders
• Bridging software — allows you to keep records in a spreadsheet and submit the summary digitally

Some software is free for basic use; others charge monthly fees. HMRC has warned that spreadsheets alone (without bridging software) do not satisfy MTD requirements.

Impact on Payments on Account

MTD ITSA does not directly change how Payments on Account are calculated — they remain 50% of the prior year's tax liability. However, quarterly reporting gives HMRC (and you) more accurate in-year data, making it easier to apply to reduce Payments on Account if your income drops significantly during the year.

In-year HMRC estimates generated by MTD are informational only — they do not create new interim payment obligations. See our Payments on Account guide for the full picture.

Exemptions from MTD ITSA

You are exempt from MTD ITSA if:

• Your qualifying income is below £50,000 (until April 2027 when £30,000 applies)
• You are a non-resident landlord (different rules apply)
• HMRC has granted a digital exclusion exemption (for those who genuinely cannot use computers due to age, disability, or location)
• Your business income comes entirely from PAYE (employed income is not within MTD ITSA scope)
• You receive income from a partnership (partnership MTD rules are being developed separately)

What to Do Right Now: Checklist

• ✓ Check if you're in scope: Add up your gross self-employment income + gross UK rental income. If it exceeds £50,000, you must comply.
• ✓ Choose your software: Select HMRC-approved MTD software and register for a free trial. Most have a trial period of 30+ days.
• ✓ Sign up for MTD ITSA: Register at gov.uk or through your software provider. Your accountant can also sign you up.
• ✓ Begin digital record-keeping immediately: The sooner you start logging income and expenses digitally, the easier your first quarterly submission will be.
• ✓ Note your first deadline: The first quarterly update for the period 6 April – 5 July 2026 is due by 5 August 2026.
• ✓ Talk to your accountant: If you use an accountant, inform them you're in scope and discuss whether they'll manage the quarterly submissions on your behalf.