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.

Making Tax Digital for Income Tax Self Assessment changes more than the method used to file information with HMRC. For taxpayers within scope, it introduces an ongoing reporting process built around digital record-keeping and quarterly updates throughout the tax year.

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 sole traders and landlords, MTD for Income Tax means that bookkeeping can no longer be treated solely as a year-end exercise. Those required to join need to maintain the relevant records digitally throughout the year so that their quarterly updates can be prepared from current information.

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.

This phased approach means that MTD for Self Assessment does not begin for every taxpayer at the same time. Sole traders and landlords should establish their qualifying income and mandatory start date rather than assuming that their existing Self Assessment filing arrangements can continue unchanged.

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.

For taxpayers with more than one source of self-employment or property income, determining whether MTD for Income Tax applies requires looking at the relevant qualifying income together. This makes checking your position particularly important where no single trade or property source exceeds the threshold on its own.

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.

The practical difference under Making Tax Digital for Income Tax Self Assessment is therefore the frequency with which records need to support HMRC reporting. Instead of organising the relevant business or property records primarily for an annual return, taxpayers within scope must maintain a process capable of supporting recurring submissions during the year.

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

Meeting these MTD for Self Assessment obligations requires both suitable software and an appropriate bookkeeping process. Software provides the mechanism for digital records and submissions, but taxpayers still need to ensure that the underlying income and expense information is recorded accurately and kept up to date.

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.

The software should also fit the way you actually maintain your business or property records. Preparing for MTD for Income Tax is not simply a matter of obtaining compatible software; the system needs to support consistent digital record-keeping throughout the tax year.

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

Where online selling forms part of a wider self-employment activity, the relevant income may therefore contribute towards determining whether MTD for Income Tax applies. The MTD threshold should not be considered solely by reference to one marketplace or individual source of trading income.

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.

For those already within the first mandatory phase, Making Tax Digital for Self Assessment is now an ongoing compliance responsibility rather than a future change. Digital records, software access and the process for preparing quarterly information should therefore already be in place.

Case Study: Moving a Landlord From Annual Self Assessment to MTD

Rachel approached our Farringdon office after learning that her rental and self-employment income brought her within Making Tax Digital for Self Assessment. She had previously provided her property records to her accountant once a year and was concerned about moving from annual reporting to digital records and quarterly updates.

Cigma Accounting reviewed Rachel’s qualifying income and confirmed the MTD requirements that applied to her. We then assessed how she recorded rent, property expenses and self-employment transactions and helped her establish a digital bookkeeping process using compatible accounting software.

Rather than waiting until the end of the tax year, Rachel began updating her records regularly so the information required for the 7 August, 7 November, 7 February and 7 May quarterly deadlines could be prepared from current records. We also explained how the final declaration fits into the annual reporting cycle.

As part of the wider review, Cigma Accounting considered Rachel’s property tax, bookkeeping, Self Assessment and personal tax planning requirements. This helped ensure that her MTD setup supported her complete tax position rather than focusing only on quarterly submissions.

Rachel entered the new reporting system with organised digital records, suitable software and a clear timetable for completing her quarterly and year-end responsibilities.