Making Tax Digital for Self Assessment: The Complete UK Guide (2026)

Making Tax Digital for Self Assessment is no longer a future consideration — it is happening now. From April 2026, HMRC has fundamentally changed how self-employed individuals and landlords report their income. If you earn above the qualifying threshold and have not yet taken action, the clock is ticking.

This guide explains everything you need to know about MTD for Self Assessment: what it is, who it affects, how it works, and what you must do to remain compliant.

What Is Making Tax Digital for Self Assessment?

Making Tax Digital for Self Assessment (MTD for ITSA) is HMRC’s initiative to replace the traditional annual Self Assessment tax return with a fully digital, quarterly reporting system. Rather than filing one return each January, eligible taxpayers are now required to maintain digital records throughout the year and submit four quarterly updates to HMRC using approved software.

The goal is to modernise the UK tax system, reduce errors caused by manual data entry, and give both taxpayers and HMRC a more accurate, real-time view of income and tax liability.

MTD for ITSA is the latest phase of the wider Making Tax Digital programme, which began in April 2019 for VAT-registered businesses above the VAT threshold and was extended to all VAT-registered businesses from April 2022.

For a comprehensive overview of how the entire Making Tax Digital programme is structured across all tax types and phases, read our complete MTD for Income Tax 2025/26 guide.

Who Does MTD for Self Assessment Apply To?

MTD for ITSA is being rolled out in phases, based on gross income from self-employment and/or property rental:

• From April 2026 — Sole traders and landlords with qualifying income above £50,000 per year must comply. HMRC used 2024/25 Self Assessment returns (filed by 31 January 2026) to identify who falls into this first wave.
• From April 2027 — The threshold drops to £30,000, bringing a second wave of sole traders and landlords into scope.
• From April 2028 — The threshold will reduce further to £20,000, as confirmed by Chancellor Rachel Reeves in the Spring Statement of March 2025.

Partnerships will be required to join at a later date, which HMRC has confirmed will be announced in due course.

Important: How HMRC Determines Your Eligibility

HMRC looks at your gross income from self-employment and property — not your profit. This catches many taxpayers off guard. For a full breakdown of what counts as qualifying income for MTD purposes and how different income sources are treated, read our dedicated guide on MTD qualifying income.

If HMRC identified you as being in scope based on your 2024/25 return, you should have received a notification letter. However, if your income exceeded the threshold and you did not receive a letter, you are still legally required to comply from April 2026.

How Does MTD for Income Tax Self Assessment Work?

Under MTD for ITSA, the single annual Self Assessment tax return is replaced by a structured, five-submission process across the tax year:

The New Reporting Structure

1. Quarterly Update 1 — Covers 6 April to 5 July; deadline 7 August
2. Quarterly Update 2 — Covers 6 July to 5 October; deadline 7 November
3. Quarterly Update 3 — Covers 6 October to 5 January; deadline 7 February
4. Quarterly Update 4 — Covers 6 January to 5 April; deadline 7 May
5. Final Declaration — Replaces the annual Self Assessment return; due by 31 January following the end of the tax year

Each quarterly update requires a summary of income and expenses for that period. The final declaration is where you confirm all income — including savings, investments, and other sources not covered by quarterly updates — and make any accounting adjustments or claims for reliefs and allowances.

What You Need to Do

To comply with MTD for ITSA, you must:

• Sign up for HMRC’s MTD Income Tax service (HMRC does not register you automatically)
• Keep digital records of all business income and expenses from 6 April onwards
• Use HMRC-approved software to maintain those records and submit quarterly updates
• Submit four quarterly updates throughout the tax year
• Submit a final declaration by 31 January each year

For a detailed breakdown of exactly what is required from April 2026 — including how to sign up, what records must be kept digitally, and how the submission process works in practice — read our dedicated guide on what is required from April 2026 for MTD Income Tax.

HMRC-Approved Software for Making Tax Digital

One of the core requirements of MTD for ITSA is the use of software that is compatible with HMRC’s systems. You cannot submit quarterly updates through HMRC’s existing online Self Assessment portal or by paper. The submission must come from approved software.

HMRC maintains a list of compatible software products. These range from full accounting platforms to simpler bridging tools. Popular options include:

• Xero — A cloud-based accounting platform widely used by sole traders and small businesses
• QuickBooks — Supports digital record-keeping and direct HMRC submission
• Zoho Books — An HMRC-recognised MTD-compatible platform suitable for self-employed individuals and landlords, supporting bank reconciliation and direct quarterly submissions
• FreeAgent — Designed specifically for freelancers and small businesses

When choosing software, consider your level of accounting knowledge, the volume of transactions you process, and whether you work with an accountant who may have a preferred platform. Before making that decision, it is worth taking a step back to assess your overall MTD readiness — our practical guide on whether you are ready for Making Tax Digital for Income Tax walks through all the key areas you need to have in place before your obligations begin.

Penalties Under MTD for Income Tax

HMRC has introduced a new points-based penalty system aligned with MTD for ITSA. This replaces the previous fixed-penalty structure for late filing.

Here is how the system works:

• Each missed quarterly update earns one penalty point
• When points accumulate to the threshold (typically four points for quarterly filers), a £200 financial penalty is triggered
• Further missed submissions result in additional £200 penalties
• Points can be reset once a period of compliance has been maintained

HMRC has confirmed that no penalties will be issued for late quarterly updates during the 2026/27 tax year as the system beds in. This gives taxpayers a transitional period to adapt — but it does not remove the obligation to submit.

Late payment of tax due continues to attract interest charges regardless of the penalty points regime.

Making Tax Digital and Online Sellers

If you earn income through selling goods or services online — whether through marketplaces such as eBay or Etsy, freelance platforms, or your own website — your income may be subject to both Self Assessment and MTD for ITSA requirements.

From January 2024, online platforms operating in the UK are legally required to report seller income to HMRC, including the number of transactions, total income received, and seller identification details. This means HMRC may already hold data on your online trading activity before you file or register.

Key thresholds to be aware of:

• The Trading Allowance allows up to £1,000 of trading or miscellaneous income per tax year without registering for Self Assessment
• Once income exceeds £1,000, Self Assessment registration is required — regardless of profit
• If gross income from all self-employment and/or property sources exceeds the MTD threshold, quarterly digital reporting is also required

Exemptions from MTD for Self Assessment

Not everyone within the income thresholds will be required to comply. HMRC recognises certain categories of exemption, including:

• Digital exclusion — Individuals who are unable to use digital tools due to disability, age, or lack of internet access
• Insolvency — Those subject to certain insolvency procedures
• Religious grounds — Where digital reporting conflicts with genuine religious beliefs
• Non-residents using SA109 — There is a deferral for certain non-resident taxpayers who file the SA109 form, pending further clarification from HMRC

If you believe you qualify for an exemption, you must notify HMRC and satisfy their requirements. Exemption is not automatic.

MTD for Self Assessment: Key Dates at a Glance

With the April 2026 deadline now upon us, businesses and landlords who have not yet taken action are running out of time. Read our dedicated guide on the MTD Income Tax deadline to understand what steps need to be completed immediately to avoid falling out of compliance.

Making Tax Digital for Self Assessment and HMRC Digital Reporting in 2026

Making Tax Digital for Self Assessment is changing how UK taxpayers record and report income, shifting from annual returns to ongoing digital submissions to HMRC. This requires consistent record-keeping throughout the year and use of compliant software rather than manual reporting at year-end.

Using HMRC Approved Self Assessment Software is now essential for compliance, with tools like Zoho Books Making Tax Digital helping automate records and improve accuracy. Under MTD Income Tax Self Assessment, errors in tracking income or expenses can quickly lead to incorrect tax calculations and unwanted HMRC queries.

At Cigma Accounting, we support clients across Fulham Broadway, helping them move to compliant digital systems and maintain accurate reporting year-round. We also assist taxpayers in Eel Brook Common and Fulham Road (SW6) preparing for HMRC’s 2026 requirements with structured, practical guidance.