Making Tax Digital for Income Tax
Income tax for self employed and landlords
Who must comply with MTD for ITSA?
Sole traders and landlords with total combined income from self-employment and/or property must comply with MTD for ITSA if:
· Their combined income exceeds £50,000 from April 2026
· Their combined income exceeds £30,000 from April 2027
Combined income means the total gross income from all relevant self-employment and property rental sources.
What do I need to do under MTD?
Under Making Tax Digital (MTD), you’ll still be responsible for reporting your income and paying your tax, but how you do it is changing: You now need to:
· Keep Digital Records
· Submit Quarterly Update
· File a Final End of Period Statement (EOPS)
Instead of paper records or manual bookkeeping, you must keep your income and expenses in a digital format — either:
· In MTD-compatible software, or
· In a spreadsheet that connects to HMRC via bridging software
Previously, you might have:
· Written income/expenses in a notebook
· Stored receipts in a shoebox
· Typed totals into your Self-Assessment form once a year
Under MTD, that’s no longer allowed. Your records must now be:
· Updated regularly (not just at year-end)
· Structured and stored digitally
· Linked to your MTD submissions
Submit quarterly updates
You’ll need to send a summary of your income and expenses to HMRC every three months. Instead of one annual return, you'll now:
· Send 4 updates per year
· Each update includes a basic summary (no detailed tax calculations)
· Deadlines falls one month after the quarter ends
(e.g. 5 August for the quarter ending 5 July)
You’ll still be able to view and adjust these later at year-end. File a final End of Period Statement
At the end of the tax year, you’ll:
· Confirm your income and expenses are accurate (EOPS)
· Make any necessary adjustments (capital allowances, reliefs, etc.)
· Submit a Final Declaration (this replaces your annual Self Assessment return) Instead of preparing and submitting everything at once by 31 January, you’ll:
· Be submitting little and often during the year
· Use software to track totals and prepare year-end summaries
· Still have to pay your tax by the usual deadlines
The tax rules haven’t changed — but the way you record and report your information has.
Can I keep using spreadsheets?
Yes, but they must connect to bridging software that sends data digitally to HMRC.
What is Bridging Software?
Bridging software is a special tool that connects your spreadsheet to HMRC’s systems. It “bridges the gap” between how you're currently working and what HMRC requires under MTD.
Instead of filling out your tax return manually or uploading numbers directly, the bridging software:
· Takes the figures from your spreadsheet (usually totals for income and expenses)
· Formats them in a way that HMRC can accept
· Sends them securely and digitally to HMRC’s system
This means you're still keeping records in a spreadsheet — but the submission is done digitally, which is what MTD demands.
What if I already use accounting software?
If it’s MTD-compliant, great. If not, we’ll help you upgrade or bridge.
Are there penalties for missing deadlines?
Yes — HMRC will introduce a points-based penalty system. Repeated late submissions may lead to fines.
Will this replace the Self-Assessment tax return?
Yes — instead of one yearly return, you’ll file four quarterly updates and a final declaration.
Can I opt out?
Exemptions apply in certain cases (e.g., age, disability, or no internet access). We’ll help assess your eligibility.
When should I start preparing?
Now. Early preparation gives you more options and less stress.
Will training and onboarding be available?
Absolutely. We offer full setup, software guidance, and tailored ongoing support.
I have multiple properties/income streams — what now?
We’ll help consolidate your reporting to ensure it's accurate and fully compliant.