Making Tax Digital for Income Tax
starts 6 April 2026

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is a UK government initiative that fundamentally changes how self-employed people and landlords report their income to HMRC.

Instead of filing one annual Self Assessment tax return, you'll need to:

• Keep digital records of all income and expenses
• Submit quarterly updates to HMRC using compatible software
• File an end-of-period statement after each tax year
• Make a final declaration (replacing the current Self Assessment return)

The goal is to make the tax system more accurate and reduce errors — but it requires new tools and habits for millions of people.

You must use HMRC-recognised software to submit your quarterly updates — you cannot submit manually or by post. However, you have two options:

Option 1 — All-in-one software: Record your income and expenses directly in the software, which then submits to HMRC. This replaces your spreadsheet entirely.

Option 2 — Bridging software: You can continue using Excel or Google Sheets to track records, then use bridging software to connect your spreadsheet to HMRC's system for submission. Your spreadsheet data must meet HMRC's digital records requirements.

Paper records alone will not be compliant with MTD for ITSA.

HMRC is introducing a points-based penalty system for MTD for ITSA. Here's how it works:

• Each missed quarterly submission earns a penalty point
• Once you reach a threshold (likely 4 points), a £200 financial penalty is charged
• Further late submissions add additional £200 penalties
• Separate penalties apply for late payment of any tax owed

If your income crosses the £50,000 threshold, you should register for MTD for ITSA before 6 April 2026. Waiting until after the deadline may result in penalties for missed Q1 2026 submissions.

No — MTD-compatible software is designed to be used directly by individuals, without needing an accountant. Many sole traders and landlords manage their own submissions successfully.

However, an accountant may be worth considering if:

• You have complex tax affairs (multiple businesses, investment properties, overseas income)
• You want to ensure you're claiming all allowable expenses correctly
• You find the quarterly rhythm difficult to manage alongside running your business
• You're transitioning from a previous accountant-managed Self Assessment

Most of the software options above allow you to share access with an accountant — so you can do the day-to-day recording yourself and have a professional review things quarterly.

The threshold is based on your combined gross income from qualifying sources — before any expenses are deducted. The two qualifying income types are:

• Self-employment income — sole trader income, freelance income, gig economy earnings
• Property income — rental income from UK or overseas property

Example: You earn £27,000 as a freelancer and receive £28,000 in rental income. Combined that's £55,000 gross — you're in Wave 1, even though neither source alone exceeds £50,000.

The following do not count towards the threshold:

• PAYE employment income
• Pension income
• Savings interest or dividends
• Capital gains

The threshold is assessed against your income from the previous tax year to determine if you must join in the next wave.

Under MTD for ITSA, you'll make five submissions per tax year in total:

The quarterly updates are summaries of income and expenses — they don't create a tax liability at each submission. Your tax bill is still calculated and paid annually by 31 January, just as with current Self Assessment.

There are a couple of genuinely low-cost options:

• FreeAgent — completely free if you hold a qualifying NatWest or RBS business bank account. This is a full-featured all-in-one product, not a stripped-down version.
• GoSimpleTax — from around £35/year, making it the cheapest paid option. No monthly subscription commitment.

HMRC has also indicated it intends to make free tools available, but availability and scope at the April 2026 launch is unconfirmed. We'd recommend not waiting and relying on a confirmed, tested option from a reputable provider.

Most paid software offers a 30-day free trial — enough time to assess the software properly before committing.