Your complete guide to
Making Tax Digital
Everything you need to know about MTD for Income Tax Self Assessment — what it is, who must comply, key deadlines, penalties, and how File MTD ITSA helps you stay compliant.
📖 What is Making Tax Digital for Income Tax?
Making Tax Digital for Income Tax (MTD IT) is HMRC's programme to digitise the UK tax system. It replaces the traditional annual Self Assessment tax return with a system of quarterly digital updates submitted throughout the year using MTD-compatible software.
Under MTD IT, qualifying taxpayers must keep digital records of their income and expenses and submit summary updates to HMRC at the end of each quarter. At the end of the tax year, they must also submit a Final Declaration (formerly called crystallisation) to confirm their tax position.
The goal is to reduce errors, improve accuracy, and give taxpayers a clearer picture of their tax position throughout the year — rather than leaving everything to a single, stressful filing deadline in January.
👤 Who must comply?
From 6 April 2026: Individuals with gross income from self-employment and/or property exceeding £50,000 per year must comply with MTD for Income Tax. This includes landlords, sole traders, and freelancers.
From 6 April 2027: The threshold drops to £30,000. Individuals earning above this amount from qualifying sources must begin using MTD-compatible software for quarterly reporting.
Future phases: HMRC has indicated the threshold may be lowered further in subsequent years, potentially to £20,000 or below. Partnerships are expected to be brought into scope in a later phase.
Qualifying income sources include UK property income, self-employment income, and foreign property income. Employment income and pension income are not currently in scope for MTD IT.
📅 Key Deadlines
Each tax year (6 April to 5 April) is divided into four quarters. Quarterly updates must be submitted by the 5th of the month following each quarter-end:
| Quarter | Period | Deadline |
|---|---|---|
| Q1 | 6 April – 5 July | 5 August |
| Q2 | 6 July – 5 October | 5 November |
| Q3 | 6 October – 5 January | 5 February |
| Q4 | 6 January – 5 April | 5 May |
After Q4, taxpayers must submit an End of Period Statement (EOPS) and a Final Declaration by 31 January following the end of the tax year. Payment of any tax owed is also due by this date.
⚠️ Penalties for Non-Compliance
HMRC has introduced a new points-based penalty system for MTD for Income Tax, replacing the old fixed-penalty approach:
Late submission penalties: Each late quarterly submission adds one penalty point. For taxpayers with quarterly obligations, the penalty threshold is 4 points. Once you reach 4 points, a £200 penalty is triggered, and every subsequent late submission also incurs a £200 penalty until the points are reset.
Late payment penalties: A first late payment charge of 2% of tax outstanding applies if tax is unpaid 15 days after the due date. A further 2% is added at 30 days. After 30 days, a daily rate of 4% per annum applies to the outstanding amount.
Interest: HMRC charges late payment interest on all overdue amounts from the due date until payment is received, at the Bank of England base rate plus 2.5%.
💻 What Software Do I Need?
You must use HMRC-recognised MTD-compatible software to keep digital records and submit quarterly updates. Spreadsheets alone are not sufficient — though you can use a spreadsheet alongside bridging software, or use an all-in-one platform like File MTD ITSA.
Your software must be able to: keep digital records of income and expenses, submit quarterly updates via HMRC's MTD API, retrieve HMRC obligations, trigger tax calculations, and submit Final Declarations. File MTD ITSA handles all of these requirements in a single platform.
🛡️ How File MTD ITSA Helps
File MTD ITSA is HMRC-recognised MTD-compatible software purpose-built for landlords, sole traders, and accountancy firms. Here's how we make compliance easy:
Digital record keeping: All your income and expense data is stored digitally in the portal, satisfying HMRC's record-keeping requirements.
Quarterly submissions: Enter your figures each quarter and submit directly to HMRC with one click. No manual API calls, no intermediaries.
Tax calculations: Trigger HMRC's official tax calculation after each submission to see your estimated liability throughout the year.
Year-end finalisation: Add annual adjustments and allowances, review your position, and submit your Final Declaration — all from one platform.
For accountants: Multi-client dashboard, client impersonation, firm branding, and compliance tracking across your entire book of clients.
❓ Frequently Asked Questions
Do I need to keep paper records?
No. Under MTD, digital records satisfy HMRC's record-keeping requirements. However, you should keep supporting documents (receipts, invoices, bank statements) as evidence in case of enquiry.
Can my accountant file for me?
Yes. Your accountant can use File MTD ITSA's firm platform to file quarterly updates and the Final Declaration on your behalf using the client impersonation feature.
What happens if I'm below the threshold?
You can voluntarily sign up for MTD even if your income is below the mandatory threshold. Many taxpayers find the quarterly discipline and real-time calculations helpful for managing their tax affairs.
What income sources are covered?
MTD IT covers self-employment income, UK property income, and foreign property income. Employment income and pensions are not in scope.
Can I test before going live?
Yes. File MTD ITSA includes a full HMRC sandbox environment where you can test every feature with synthetic data before connecting to HMRC's live systems.
MTD Guide — FAQ
Questions about Making Tax Digital requirements.