Making Tax Digital for Income Tax (The Essentials)

The Phased Rollout: Deadlines and Income Thresholds

The transition to MTD for ITSA is mandatory, with the start date determined by an individual’s “qualifying income.” This refers to gross income (total turnover or rent) before any expenses are deducted. For individuals with multiple income streams—such as several rental properties or a combination of rental income and self-employment—the combined total across all sources dictates the compliance deadline.

It is worth noting that the ‘Gross Income Threshold’ is based on the income reported in the earlier year’s tax return, for example, the £50,000 threshold for 6 April 2026 is assessed based on the income reported in the 2024/25 tax return. A person also does not move into MTD for Income Tax before filing their first Self Assessment tax return.

Implementation Date	Gross Income Threshold	Affected Groups
6 April 2026	Over £50,000	Sole traders and landlords
6 April 2027	Over £30,000	Sole traders and landlords
6 April 2028	Over £20,000	Sole traders and landlords

The New Reporting Framework: Quarterly Updates

MTD for ITSA replaces the single annual Self Assessment Tax Return with a multi-step reporting cycle. Taxpayers are required to submit a separate update for each distinct source of income (e.g., if a landlord has both a self-employed business and a rental property business, they must provide updates for both).

Quarterly Submission Schedule & Final Tax Return

The standard quarterly periods follow the tax year. However, taxpayers may elect to use “calendar quarters” (ending on the last day of the month) for simplicity. Regardless of the choice, updates must be submitted no later than one month after the end of the period.

1. Quarter 1: 6 April – 5 July (Deadline: 7 August)
2. Quarter 2: 6 July – 5 October (Deadline: 7 November)
3. Quarter 3: 6 October – 5 January (Deadline: 7 February)
4. Quarter 4: 6 January – 5 April (Deadline: 7 May)
5. Final tax return: by 31^st January of the following year

Other Practical Points Often Missed

MTD is not only a filing change. Those within scope must keep digital records and use software that works with MTD for Income Tax for their self-employment and/or property business. Bank feeds may help, but the taxpayer remains responsible for checking that the records are complete and correctly categorised.

Quarterly updates are summaries, not tax returns. They are usually based on category totals from the digital records, and year-end accounting or tax adjustments are generally made later through the end-of-year return. Even if there is no income or expenditure in a quarter, an update is still required.

Not everyone with Self Assessment income is brought in immediately. Partnerships are not yet within the mandation timetable, and there are also exemptions or deferrals in some cases, including digital exclusion and certain specified categories. Eligibility, therefore, needs to be checked, rather than assumed.

Compliance and Penalties

HMRC is shifting to a “points-based” penalty system to encourage timely compliance. A taxpayer will receive one penalty point for each missed quarterly deadline. Once a threshold of four points is reached, a £200 fixed penalty is triggered. For taxpayers mandated from 6 April 2026, HMRC says it will not apply penalty points for late quarterly updates for the first tax year only. However, penalties for late tax returns and late payment, plus interest on unpaid tax, still remain relevant.

This article is for general information only and should not be relied on as a substitute for specific tax advice.

This article is provided for general information only. It does not constitute tax, legal or other professional advice, and should not be relied on as a substitute for specific advice based on your particular circumstances.