What MTD for Income Tax actually is
MTD for Income Tax Self Assessment (usually shortened to MTD ITSA or MTD for Income Tax) is HMRC’s new way of reporting self-employment and property income. Instead of one Self Assessment return after the year ends, you keep digital records throughout the year and report through your software in a continuous cycle: four quarterly updates followed by a final declaration. The tax you pay and the deadlines for paying it do not change — what changes is how and how often you report.
Who it applies to, and when
MTD ITSA applies to sole traders and landlords, phased in by qualifying income:
- From 6 April 2026 — qualifying income over £50,000
- From April 2027 — qualifying income over £30,000
- From April 2028 — qualifying income over £20,000
Qualifying income is your gross self-employment and property income added together — turnover before expenses, not profit. Partnerships and those below £20,000 are not yet in scope; HMRC has said it will confirm timing for them separately. Employees, and people whose only income is from pensions, savings or dividends, are not brought in by these rules.
The reporting cycle, step by step
A full MTD Income Tax year looks like this:
- All year: record income and expenses digitally, as they happen.
- Quarter 1 (6 Apr – 5 Jul): update due 7 August.
- Quarter 2 (6 Jul – 5 Oct): update due 7 November.
- Quarter 3 (6 Oct – 5 Jan): update due 7 February.
- Quarter 4 (6 Jan – 5 Apr): update due 7 May.
- Final declaration: due 31 January after the tax year ends.
You can elect to use calendar quarters (ending 30 Jun, 30 Sep, 31 Dec, 31 Mar) if that fits your records better.
Quarterly updates vs the old Self Assessment return
A quarterly update is a running summary of income and expenses for each source, sent from your software. It is deliberately light: it is not a tax calculation, you claim no reliefs and pay no tax at this stage, and any error is simply corrected in the next update because the figures are cumulative. The point is to keep an up-to-date picture rather than to finalise anything.
The year-end final declaration
The final declaration is where the year is finalised and it replaces the Self Assessment return for people within MTD. It does two jobs. First, it finalises each business or property source — applying accounting and tax adjustments such as capital allowances, the finance-cost restriction for landlords, or private-use proportions. Second, it brings in all your other income and reliefs — employment, pensions, dividends, savings, Gift Aid, pension contributions — to confirm your final tax position. It is due by 31 January, and your tax is payable then, exactly as under Self Assessment.
Digital records and compatible software
Two requirements sit underneath the whole system. You must keep digital records of income and expenses from the point of each transaction, with a digital link through to the figures you submit — no retyping totals by hand. And you must use HMRC-recognised software to submit, or a spreadsheet connected to bridging software. HMRC keeps a published list of recognised products; it is worth choosing one that fits how you already work.
Penalties for MTD Income Tax
Late quarterly updates and final declarations fall under a points-basedsystem: each late submission earns a point, and reaching the threshold (four points for quarterly filers) triggers a £200 penalty. Late payment of tax is charged separately, with interest. Those mandated from April 2026 benefit from a 12-month soft landing during which no points are issued for late quarterly updates — but late-payment charges still apply.