The UK tax system is undergoing a significant transformation, and for many self-employed individuals and landlords, the way income is reported to HMRC is about to change. From 6 April 2026, Making Tax Digital for Income Tax Self Assessment will become mandatory for those with business or property income exceeding the threshold set by HMRC. This initiative marks a shift from traditional annual tax returns to a more dynamic, digital-first approach.
Making Tax Digital is part of a broader government effort to modernise the tax system. It aims to make tax administration more effective, efficient, and easier for taxpayers to get their tax right. The changes have already impacted VAT-registered businesses and will soon affect a broader segment of taxpayers, particularly those using Self Assessment.
What is MTD for ITSA?
MTD for ITSA replaces the annual Self Assessment return with a digital process that includes the submission of quarterly updates and other digital interactions. Taxpayers will need to maintain digital records of income and allowable expenses throughout the year. Instead of filing a single tax return, users will submit quarterly summaries to HMRC using compatible software. HMRC will then provide an estimated tax calculation based on the submitted figures.
At the end of the tax year, taxpayers must submit an End of Period Statement to finalise their accounts, making any necessary adjustments. This is followed by a final declaration confirming all income for the year, at which point HMRC will determine the final tax liability. Payment is due by 31 January following the end of the tax year.
Who is Affected?
The new rules apply to self-employed individuals and landlords with qualifying income. If you have an annual business or property income above the HMRC threshold, you will be required to comply with MTD for ITSA. This includes:
- Sole traders
- Private landlords
- Individuals with income from partnerships (in future phases)
The system will not immediately apply to those below the income threshold or those in employment without qualifying self-employment or property income. However, HMRC may expand the scope in future updates.
Digital Record-Keeping Requirements
A core element of MTD for ITSA is the requirement to maintain digital records. These must include the dates, amounts, and nature of all income and expenses related to your business or property. Paper records and spreadsheets alone will no longer be sufficient unless supported by bridging software that meets HMRC’s digital submission requirements.
Digital records can be kept using accounting software or applications that comply with MTD regulations. This software must be capable of capturing all relevant information and storing it in a secure, structured digital format. This ensures consistency and allows easy transmission to HMRC.
Quarterly Submissions Explained
Instead of filing a single Self Assessment return, MTD for ITSA requires four quarterly submissions throughout the year. These summaries must be sent via compatible software and include details of income and allowable expenses for the relevant period. Each submission provides an estimate of your tax liability, helping you plan and budget accordingly.
The quarterly reporting periods are fixed and apply to all taxpayers as follows:
- 6 April to 5 July
- 6 July to 5 October
- 6 October to 5 January
- 6 January to 5 April
Submissions must be made within one month of the end of each period. For example, the first quarterly update must be submitted by 5 August.
Year-End Reporting Requirements
After submitting your quarterly updates, you must complete an End of Period Statement. This step allows you to make any necessary adjustments, such as accruals, stock valuations, or tax reliefs. The final declaration, due annually, includes all income sources for the year and confirms the total taxable income.
The final declaration replaces the current Self Assessment return and serves as your official confirmation of total tax liability for the year. Once submitted, HMRC will confirm the amount of tax owed, including any National Insurance contributions.
Exemptions and Special Circumstances
While most qualifying individuals must comply with MTD for ITSA, exemptions are available in specific circumstances. You can apply for an exemption if it is not reasonably practicable for you to use digital tools due to:
- Age
- Disability
- Location (e.g., lack of internet access)
- Religious beliefs
Applications must be made directly to HMRC, and each case is assessed individually. Approval is not automatic, and you may need to provide supporting evidence.
Benefits of MTD for ITSA
Although the new system introduces additional steps, it also offers benefits. Quarterly submissions mean you no longer have to wait until the end of the year to understand your tax liability. This real-time insight helps with budgeting and cash flow management.
Digital record-keeping can also reduce errors, improve accuracy, and streamline your tax reporting process. Many MTD-compatible software solutions include tools to automate data entry, capture receipts, and categorise expenses, making it easier to maintain accurate records.
Preparing for the Transition
While MTD for ITSA becomes mandatory in April 2026, preparation should begin well in advance. The first step is understanding your obligations and determining whether your income meets the threshold for mandatory compliance. Next, review your current record-keeping practices and assess whether they meet the new digital requirements.
If you use accounting software, check with your provider to confirm whether they plan to offer MTD-compatible solutions. If you currently rely on spreadsheets or manual methods, you’ll need to consider adopting new tools or bridging software.
Joining the MTD for ITSA Pilot Scheme
HMRC has launched a voluntary test pilot programme for MTD for ITSA, allowing eligible taxpayers to start using the new system ahead of the official deadline. Joining the pilot can help you get accustomed to the new process, test different software options, and address any issues before compliance becomes mandatory.
To join the pilot, you must:
- Be a UK resident
- Be registered for Self Assessment
- Be up to date with tax returns and payments
- Use MTD-compatible software
Participating in the pilot gives you the opportunity to gain early experience, streamline your processes, and provide feedback that can help shape the system’s development.
Key Responsibilities
Transitioning to MTD for ITSA involves several core responsibilities:
- Maintain digital records of income and expenses
- Submit quarterly summaries via MTD-compatible software
- Complete an End of Period Statement
- File a final declaration confirming all income
- Pay any tax due by the usual deadline
Meeting these obligations requires planning, adopting the right technology, and understanding the new requirements. Early preparation can ease the transition and help avoid potential penalties or compliance issues.
Importance of Selecting Suitable MTD-Compatible Software
As the deadline for Making Tax Digital for Income Tax Self Assessment approaches, choosing the right software becomes an essential part of compliance planning. From April 2026, individuals with qualifying business or property income will need to use digital tools that align with HMRC’s requirements. With no official software provided by the government, taxpayers must select a third-party solution that is not only compliant but also efficient, reliable, and suitable for their personal or business needs.
The right software will support the entire MTD for ITSA process—from digital record-keeping to quarterly updates, year-end summaries, and final declarations. It must integrate seamlessly with HMRC systems, provide accurate submissions, and offer features that make the transition as smooth as possible.
Checking Existing Software for Compatibility
One of the first steps is to determine whether your current accounting system or bookkeeping tool is being updated to meet MTD for ITSA standards. Many software developers are actively working to ensure their platforms are compliant. Check with your provider to confirm their timeline and feature roadmap. If your existing software won’t be compliant or lacks essential functions, it’s time to explore alternatives.
Using spreadsheets or manual record-keeping will no longer suffice under MTD rules unless supported by approved bridging software. These tools act as a link between spreadsheets and HMRC’s systems, enabling digital submissions in the correct format. While bridging software can help ease the transition, it may not provide the full functionality required for efficient ongoing compliance.
Evaluating MTD-Compatible Software Options
There is a wide variety of MTD-compatible software on the market, ranging from basic applications for individual landlords to comprehensive accounting systems designed for business owners. When evaluating these options, consider your specific needs, technical ability, and future plans.
The most effective software will allow you to:
- Record all business and property income
- Categorise expenses accurately
- Store digital copies of receipts
- Generate quarterly summaries automatically
- Submit data directly to HMRC
- Create and finalise End of Period Statements and final declarations
Look for solutions that also provide dashboards or visual insights to help track your tax obligations and cash flow in real time.
Subscription Costs and Pricing Models
Cost is a significant factor when selecting software. Most platforms operate on a subscription basis, either monthly or annually. Entry-level packages may offer basic record-keeping and submission features, while more advanced plans include tools for invoicing, banking integration, and financial reporting.
Before subscribing, assess which features are essential for your situation. If you’re a sole trader with simple finances, you may not need the full suite of business tools included in higher-priced plans. However, if you manage multiple income streams or require collaborative access for your accountant or bookkeeper, a more advanced package may be worth the investment.
Some providers offer flexible plans that allow you to scale up or down depending on your needs. Take advantage of free trials or demos to determine which plan offers the best balance of functionality and affordability.
Assessing Ease of Use and User Experience
Ease of use is one of the most important factors to consider. The software should be intuitive enough that you can confidently manage your tax responsibilities without needing deep accounting knowledge. Navigation, data entry, and report generation should all be straightforward.
A user-friendly interface can reduce the likelihood of errors and ensure a more accurate and efficient workflow. If you’re not confident using new technology, look for solutions that offer detailed guides, video tutorials, and onboarding support.
Ask these questions when evaluating ease of use:
- How quickly can I get set up?
- Is data entry simple and efficient?
- Are support resources readily available?
- Can I easily access key reports and summaries?
A short learning curve can significantly reduce stress, especially during the transition period leading up to 2026.
Availability of Customer Support
Reliable customer support is crucial, particularly during your first year using MTD-compatible software. From installation to quarterly submissions, you may encounter technical questions, unexpected issues, or uncertainties about data entry.
Check the level of customer service provided. Some companies offer 24/7 support via live chat, email, or phone, while others may operate limited hours. Also consider the responsiveness and expertise of the support team. Reading user reviews or asking current users about their experiences can help you gauge how well the provider handles support inquiries.
Support documentation, FAQs, and online help centres can also provide valuable guidance. Having access to well-organised help materials can reduce reliance on direct support and help resolve questions more quickly.
Flexibility and Adaptability
Your financial situation might evolve over time. Whether your business grows, you take on additional income streams, or you hire an accountant to assist with your filings, your software should be flexible enough to adapt.
Choose software that accommodates multiple users or roles, particularly if you plan to share access with financial professionals. Check whether the software can handle additional business types or income sources if your circumstances change. Multi-platform access (desktop, mobile, tablet) can also enhance flexibility and convenience.
Scalable software ensures that you won’t need to migrate to another platform as your requirements change. Investing in a tool that grows with you can save time, money, and effort in the long run.
Integration with Other Financial Tools
Many self-employed individuals and landlords already use a variety of digital tools to manage different aspects of their finances. Integration with these existing systems can simplify workflows and reduce the need for manual data entry.
For example, your MTD software might connect with:
- Bank accounts for automatic transaction imports
- Invoicing platforms for issuing and tracking payments
- Payment processors to reconcile income
- Payroll systems for managing wages and taxes
When software is able to sync with other tools, it reduces duplication and minimises the risk of data errors. Integration also makes real-time updates and reporting more effective, helping you make informed decisions based on the latest financial data.
Security and Data Protection
Handling sensitive financial data requires robust security. The software you choose should comply with current data protection laws, including the UK’s General Data Protection Regulation (UK GDPR). Look for systems that offer features such as:
- Encrypted data storage and transmission
- Secure login with two-factor authentication
- Regular software updates and security patches
- Backups to prevent data loss
Before subscribing, review the provider’s privacy policy and security protocols to ensure your data will be protected. If you’re working with an accountant, check whether they have specific security recommendations or requirements.
Planning for Future Updates and Compliance Changes
The rules around Making Tax Digital may continue to evolve as HMRC refines its approach and gathers feedback from users. Choose software from a provider that is committed to staying compliant with future updates and offering ongoing support.
Some software companies participate in consultations with HMRC and adjust their tools accordingly. Being with a provider that anticipates changes and adapts quickly can give you peace of mind. Regular software updates, feature improvements, and proactive communication are good signs that the provider is prepared for the long term.
Testing and Evaluating Before Committing
Take the time to test different software options before making a final decision. Most providers offer limited-time trials or demo versions that allow you to explore the interface, try basic features, and assess usability.
During your trial period, test these functions:
- Adding and categorising transactions
- Generating and submitting a quarterly update
- Uploading receipts or documents
- Running reports and checking estimated tax calculations
Evaluate whether the software matches your expectations and whether the experience aligns with your working style. Taking this hands-on approach will help you make an informed choice.
Transition Timeline and Implementation Plan
Switching to MTD-compatible software doesn’t have to be done overnight. Creating an implementation plan can make the process more manageable. Start by:
- Setting a target date to begin using the new system
- Migrating your existing records and testing the import process
- Learning how to perform key tasks in the software
- Gradually shifting from your old system to the new one
Allowing time for familiarisation, testing, and corrections reduces the risk of disruption. If needed, seek guidance from a financial advisor or accountant to ensure a smooth setup.
Software Selection Priorities
When choosing MTD-compatible software for Income Tax Self Assessment, your priorities should include:
- HMRC compatibility and compliance
- Feature set that matches your needs
- Cost and value for money
- User-friendly design and onboarding support
- Responsive customer service
- Security and data protection
- Flexibility, scalability, and integrations
Shifting to a Digital-First Mindset
Adapting to Making Tax Digital for Income Tax Self Assessment is about more than just software. It requires a proactive shift in how self-employed individuals and landlords approach their financial responsibilities. With the April 2026 deadline approaching, preparation is the key to ensuring a smooth and compliant transition. Beyond the technical tools, success will depend on embracing new habits, learning the system, and staying engaged with your financial records throughout the year.
The first step in preparing for MTD for ITSA is developing a digital-first mindset. This involves moving away from traditional methods such as paper receipts, handwritten logs, and end-of-year catch-ups. Instead, taxpayers must get comfortable with real-time, digital record-keeping. Consistently updating your financial records not only ensures compliance but also offers valuable insights into your business or rental property performance.
Understanding the MTD for ITSA Reporting Cycle
Under the new system, taxpayers will submit data more frequently to HMRC. Instead of filing a single Self Assessment tax return at the end of the year, you will:
- Keep digital records of all business and property transactions
- Submit quarterly updates summarising income and expenses
- Complete an End of Period Statement with any necessary adjustments
- File a final declaration that includes total income from all sources
These changes require continuous engagement with your financial data. While the reporting schedule is fixed, staying on top of your records ensures you meet deadlines without stress.
Setting Up Digital Record-Keeping Systems
A successful transition to MTD for ITSA depends heavily on reliable digital record-keeping. Most MTD-compatible software offers features that allow you to record income and expenses in real time, categorise transactions, and store documentation securely in the cloud.
Start by organising your existing records and digitising any paper documents. Scan and upload receipts, statements, and invoices to your software or cloud storage. Establish a routine for entering data—ideally weekly or monthly—so that updates don’t become overwhelming.
Digital record-keeping also includes automating certain tasks. Many tools allow automatic bank feeds, where transactions from your bank account are imported directly into your software. This reduces manual entry, minimises errors, and ensures all data is up to date.
Learning the Basics of Income and Expense Categorisation
Understanding how to categorise income and expenses correctly is fundamental to accurate reporting. Most accounting software will guide you through this process, but it’s still helpful to understand the basics. Categories commonly used include:
- Business income
- Property rental income
- Office supplies
- Utilities
- Travel expenses
- Repairs and maintenance
Correct categorisation not only ensures compliance with HMRC rules but also helps you make better financial decisions. Mistakes in this area can lead to incorrect tax calculations or delays during review.
Staying Informed About HMRC Guidelines
MTD for ITSA is still evolving, and HMRC continues to release guidance as the rollout progresses. It’s important to stay informed about updates, changes, or clarifications to ensure you’re always working with the most accurate information.
Subscribe to HMRC updates or financial news platforms that cover tax developments. If you work with an accountant, have regular check-ins to discuss changes that might affect your reporting obligations. Being proactive about staying informed prevents last-minute surprises.
Developing a Quarterly Workflow
With quarterly updates now part of the tax process, creating a structured workflow is essential. Mark each reporting deadline on your calendar and build time into your schedule to review and prepare your submission. A typical quarterly workflow might include:
- Reviewing bank transactions and categorising them
- Uploading and attaching supporting documents
- Generating the quarterly update through your software
- Reviewing the summary for accuracy
- Submitting the update to HMRC before the deadline
This systemised approach ensures you’re never caught off guard and helps maintain consistency across reporting periods.
Preparing for the End of Period Statement
The End of Period Statement is where final adjustments are made to the quarterly data. This might include accounting for depreciation, correcting errors, or applying specific tax reliefs. Familiarise yourself with the adjustments that may apply to your situation and work with an advisor if necessary.
Use this opportunity to reconcile all quarterly submissions, verify your records, and address any inconsistencies. Having accurate year-end data simplifies the final declaration process and ensures compliance.
Building Financial Confidence Through Practice
For many individuals, the shift to digital tax reporting can feel intimidating. Building confidence starts with hands-on experience. Use your MTD-compatible software regularly, even before the deadline, to get used to entering transactions, generating reports, and navigating features.
You can simulate the reporting process by tracking real income and expenses in your software, running test summaries, and comparing the estimated tax calculations with your expectations. This exercise will help you understand how your financial activities translate into tax obligations.
Practice also helps identify weaknesses in your current system. If you notice gaps in your record-keeping or recurring errors, you’ll have time to correct them before full compliance is required.
Collaborating with Accountants and Bookkeepers
Working with an accountant or bookkeeper can ease the transition significantly. Professionals familiar with MTD for ITSA can guide you through setup, check your records for accuracy, and even manage your submissions if needed.
If you don’t currently use an accountant, consider whether it would be beneficial. Many software platforms offer multi-user access, allowing your advisor to collaborate with you directly within the system. This can reduce errors and free up time for other business activities. Make sure your accountant is up to date with MTD requirements and is prepared to work with your chosen software. Good communication is essential, especially as deadlines approach.
Keeping Consistent and Accurate Records
Consistency is a major factor in maintaining accurate digital records. Rather than viewing record-keeping as a task to tackle at the end of the month, try incorporating it into your weekly routine. This prevents the buildup of unprocessed data and allows you to monitor your financial health more closely.
To support this habit, use mobile apps that allow you to log expenses or scan receipts on the go. Digital tools should make the process quicker and easier, enabling you to focus on running your business.
Accuracy also depends on routine checks. Set aside time each month to review your records, identify any discrepancies, and ensure everything is up to date. This proactive approach can prevent issues during quarterly updates or year-end reporting.
Budgeting for Tax Payments Throughout the Year
One of the benefits of MTD for ITSA is that it provides more frequent insights into your tax liability. Use quarterly estimates to plan your finances and set aside money for your tax bill regularly. Instead of facing a large payment in January, you’ll have a clearer idea of what’s owed and more time to prepare.
Many business owners and landlords benefit from opening a dedicated savings account for tax payments. By transferring a portion of income each month, you build a buffer that covers tax obligations and avoids cash flow strain.
Review your tax estimates after each quarterly submission and adjust your savings plan as needed. The real-time data provided by your software can be a powerful tool for managing both expected and unexpected expenses.
Participating in the MTD for ITSA Pilot Scheme
If eligible, joining the pilot scheme is an excellent way to prepare for the upcoming requirements. It gives you early access to the system, allows you to practice digital submissions, and helps identify any areas where you need improvement.
To participate, you must:
- Be a UK resident
- Be registered for Self Assessment
- Be up to date with previous tax filings
- Use MTD-compatible software that supports pilot participation
The pilot is voluntary, and joining now can reduce the learning curve when the mandate becomes official. It also helps you establish habits that align with the digital reporting cycle.
Establishing a Reliable Review Routine
Setting up regular review sessions for your financial records ensures you remain organised and catch issues early. Schedule time each month or quarter to:
- Review transactions and correct misclassifications
- Compare income and expense trends
- Update and organise supporting documents
- Reconcile your software records with your bank statements
This process improves accuracy and provides a clear picture of your financial standing. It also ensures you’re fully prepared when it’s time to submit your next quarterly update or End of Period Statement.
Leveraging Educational Resources
Numerous resources are available to help you better understand MTD for ITSA and improve your overall tax literacy. HMRC publishes guidance documents, webinars, and help articles designed for taxpayers new to the system. Financial education websites, industry blogs, and community forums are also helpful.
Invest time in learning the basics of business finance and tax reporting. The more informed you are, the easier it will be to make confident decisions, manage your records, and ensure compliance. Continuing education also helps you stay on top of updates or changes introduced by HMRC.
Conclusion
The introduction of Making Tax Digital for Income Tax Self Assessment represents a fundamental shift in the way self-employed individuals, landlords, and other taxpayers manage and report their financial information. By 6 April 2026, digital record-keeping and regular submissions to HMRC will no longer be optional, they will be a legal requirement.
Across this series, we explored the implications of MTD for ITSA, how to select appropriate software, and how to effectively prepare for full compliance. From understanding the transition away from annual tax returns to setting up reliable systems for digital records, it’s clear that early preparation is crucial.
Success with MTD for ITSA doesn’t rely solely on using compatible software. It demands a mindset change, embracing digital tools, creating consistent workflows, improving tax literacy, and adopting a more frequent and transparent view of your financial position. This change can initially seem daunting, especially if you’ve previously relied on paper-based processes or ad hoc record-keeping. However, with the right tools, support, and knowledge, it can also lead to increased financial control, fewer tax-time surprises, and better budgeting throughout the year.
Whether you’re choosing between full-featured MTD-compatible solutions or bridging software to work alongside existing systems, your decision should be guided by cost, ease of use, available support, and how well it aligns with your ongoing needs. Exploring pilot schemes or starting digital record-keeping early can make the eventual transition smoother and less stressful.
By developing new habits now, such as updating your records regularly, categorising income and expenses correctly, and engaging with your tax responsibilities throughout the year, you’ll not only comply with the new rules, but also set yourself up for long-term financial success.
As the April 2026 deadline approaches, take the initiative to review your systems, educate yourself, and start transitioning at a manageable pace. Adapting now ensures you remain in control, stay compliant, and benefit from the efficiencies that Making Tax Digital is designed to deliver.