FAQ – Making Tax Digital for Income Tax

This FAQ gathers the most common questions about Making Tax Digital for Income Tax (MTD ITSA), providing simple and clear answers.

What is MTD for Income Tax?

Making Tax Digital for Income Tax (MTD ITSA) will necessitate that certain taxpayers, including sole traders and landlords, keep digital records and submit quarterly updates detailing their income and expenses to HMRC. This will be followed by a final end-of-year declaration, which will effectively replace the traditional self-assessment tax return.

Who needs to comply with MTD for Income Tax from April 2026?

• Starting from 6 April 2026, individuals whose combined annual turnover from self-employment and/or gross property rental income exceeds £50,000 will be required to comply. This threshold will be assessed based on your 2024/25 Self-Assessment tax return. It’s crucial to remember that these figures represent gross income, calculated before any expenses are deducted.
• From 6 April 2027, this threshold reduces to £30,000 and will be assessed based on the 2025/26 return.
• From 6 April 2028, this threshold reduces to £20,000 and will be assessed based on the 2026/27 return.

When do I need to sign up for MTD for Income Tax?

Formal mandation for those over the threshold starts from 6 April 2026 (or 6 April 2027 if gross turnover and/or rent is over £30k).

You can voluntarily sign up earlier and join the testing programme.  It is often simpler to join at the start of the tax year, but you can register at any time and catch up any missed quarterly updates.  Penalties do not apply to late quarterly returns during the testing phase.

Can I register myself or does my accountant need to do it?

Yes you can, through your Government Gateway.  Alternatively, with your authorisation, we can sign you up for MTD ITSA through our agent services account.

What if my business starts part way through a tax year – when does MTD apply?

If you launch a new business after MTD comes into effect, your official digital start date will typically be 6 April of the year following the tax year in which you are first required to submit a Self-Assessment tax return for that new venture.

What about partnerships and limited companies?

The government intends to bring partnerships within MTD for Income Tax from a date that is yet to be announced. HMRC have confirmed that they do not intend to introduce Making Tax Digital (MTD) for Corporation Tax.

Is it mandatory to use software for MTD for Income Tax?

Yes.  Businesses must keep digital records and submit quarterly updates via software which is compatible with HMRC’s MTD requirements.  If you’re a small business looking to avoid the complexities of online software, we are here to assist you.  We can provide you with an easy-to-use spreadsheet for you to fill out, which we will then transform using our specialised software.  This ensures your submissions we provide to HMRC for you are accurate and compliant.

What if I already have bookkeeping software for VAT?

You will still need to submit separate quarterly updates for MTD for Income Tax.  If your VAT quarters do not align with MTD for Income Tax quarters , you will need to manage both schedules.  We recommend aligning your VAT quarters with the MTD ITSA periods.  While some businesses might choose to align them for convenience, it is not mandatory.

Are there four separate tax returns each year?

No.  You will need to submit:

• Four quarterly updates of income and expenses for each self employment.
• Four quarterly updates of income and expenses for all UK properties combined.
• Four quarterly updates of income and expenses for all overseas properties combined.
• One final declaration at year-end to adjust for any tax or accounting items and confirm the final figures.

For your quarterly updates, you will only need to provide summary totals rather than detailed transaction data.

Many individuals will of course also be required to submit quarterly MTD for VAT returns.

How long after the end of a quarter do I have to submit the information?

Quarterly updates must be submitted within about 1 month (technically 1 month + 7 days if calendar quarters) following each quarter-end.

You can choose between using:

• The default tax-year quarters (6 April – 5 July, 6 July – 5 October, etc.), or
• Calendar quarters (1 April – 30 June, 1 July – 30 September, etc.) by making an election.

No other custom quarter dates are permitted.

Errors and omissions will be corrected on a cumulative basis, without the need to re-file an earlier return.  Errors and omissions must be corrected promptly and in any event by the time the next quarterly update after discovery is filed.

Do I need to make quarterly tax payments?

No.  There is no change to the payment deadlines.  Tax Remains payable under the usual Self-Assessment due dates.

What is included in the quarterly returns?

The quarterly returns contain summary income and expenditure information in set categories.  The categories are broadly similar to those used in the current self-assessment return for self-employment and property income.  Individual transaction details are not part of the quarterly returns – that level of detail remains in the software you use.

How is property income reported under MTD for Income Tax?

Landlords whose total rental income, or combined rental income with self-employed earnings, surpasses the turnover threshold are required to maintain digital records and provide quarterly updates on their rental income and allowable expenses.

Will there be penalties for late or missing quarterly updates?

Yes, from April 2026, businesses with a turnover over £50,000 will face a new points-based penalty system. This system will work independently but in a similar way to the current one for Making Tax Digital for VAT:

• One penalty point per missed submission deadline.
• After four points, a financial penalty of £200 is charged.

No late-submission penalties apply during the voluntary testing phase (before April 2026).

Contact us

At PKB, we’re so much more than just accountants. We’re Chartered Certified Accountants, registered and regulated by ACCA, one of the world’s most reputable accounting bodies. This accreditation reflects our commitment to the highest standards of professionalism and expertise, so you can feel confident placing your trust in our guidance as these changes unfold.

If you’re concerned about or need help with any aspect of Making Tax Digital for Income Tax Self Assessment, please don’t hesitate to get in touch with PKB. We can help you get set up, ensure you’re compliant with HMRC’s regulations or simply provide further information.