MTD for ITSA is part of the Government’s Tax Administration Strategy, which aims to transform and modernise the tax system. It introduces a new regime for sole traders and landlords to report their income throughout the year.
Previously income tax information was only collected on Tax Returns, which recorded details for accounting periods that ended during the previous tax year. By the time the information was collected, it could already be very out of date. Under the new regime of MTD for ITSA the data that is reported will be much more current and relevant.
The new regime comes into force initially from April 2026 and will be extended to include more taxpayers from April 2027. See below in relation to eligibility and timing.
It is possible to sign up now on a voluntary basis to assist in testing the system. Many taxpayers are eligible for this trial basis and could benefit from a soft launch to assist them in getting their own procedures in place.
An MTD regime for VAT (Value Added Tax) is already in operation. Those provisions are not covered in this section but may also be relevant to individual taxpayers operating trading businesses for example.
Which category of taxpayers are affected?
The new reporting requirement of MTD for ITSA applies to individuals who make profits from a trade, vocation, or property business. The new rules require them to maintain and submit digital records for each separate business. These submissions will include Quarterly Updates and a Final Declaration.
This new regime does not apply to individuals who are employed and taxed under Pay As You Earn (“PAYE”). It is also not relevant to individuals who only receive from other non-earned sources, for example investments or income from trusts.
At present Partnerships are not included within the regime although these structures are expected to be brought within the scope at some point.
Where property is jointly owned, each individual is required to report only their share of the income and expenditure.
Does this apply regardless of income levels?
From April 2026 taxpayers with turnover of more than £50,000 (from all relevant sources) will be subject to the MTD ITSA provisions and will be required to make their first digital submission in August 2026. From April 2027 the regime will be extended and will include taxpayers whose turnover exceeds £30,000.
It is important to note that the relevant figure relates to turnover, i.e. gross income generated before the deduction of expenses. For existing businesses with a reporting history, turnover from previous years will be used to determine whether the £50,000 and £30,000 limit has been exceeded.
It is expected that in the future the regime may be extended further to include taxpayers with income below £30,000.
In cases of joint ownership, for example, jointly held rental properties, each taxpayer should consider their share of the income in determining whether they are above the reporting limits.
What will be included in the Quarterly Updates?
The Quarterly Updates will include details of the income and expenditure for that trade or business. This will include the amounts and relevant dates but will not need to be adjusted for tax or accounting purposes. Any such adjustments will be made after the year end when final submissions are made.
Separate Quarterly Updates will need to be made for each business or profit source. For example, an individual working as a self-employed plumber, who also receives income from renting out property would need to make Quarterly Updates for the plumbing business and separate Quarterly Updates for the rental property business.
To reduce the workload, it is possible to submit summarised data, rather than a full breakdown of the income and expenditure. A retail business for example could include daily or weekly takings rather than detailing each individual sale.
How often do taxpayers need to submit their information?
Digital reports will be required quarterly during the tax year and a final declaration will be needed after the tax year has ended. By default, taxpayers will be required to make their reports based on quarter-end dates in line with the tax year. If they chose to, taxpayers could elect to make their reports on calendar year quarter-end dates. These quarter-end dates are standardised and not linked to the accounting year-end adopted by any individual business.
Taxpayers will only have a few weeks in which to collate and submit the information electronically following whichever quarter-end regime they choose to use. The reporting will be cumulative for the year, as shown in the table below. In practical terms, this means that any errors found for one quarter can be corrected in the cumulative data submitted following the end of the next quarter.
The tables below show the quarter-end dates and the relevant submission deadlines.
Tax Year Quarter End Reporting
| Period Reported | Filing Deadline | |
| Quarter 1 | 6 April to 5 July | 7 August |
| Quarter 2 | 6 April to 5 October | 7 November |
| Quarter 3 | 6 April to 5 January | 7 February |
| Quarter 4 | 6 April to 5 April | 7 May |
Calendar Year Quarter End Reporting
| Period Reported | Filing Deadline | |
| Quarter 1 | 1 April to 30 June | 7 August |
| Quarter 2 | 1 April to 30 September | 7 November |
| Quarter 3 | 1 April to 31 December | 7 February |
| Quarter 4 | 1 April to 31 March | 7 May |
What happens at the year end?
Further guidance is expected in relation to year end submissions, but taxpayers are expected to make a Final Declaration, which will be very similar to a Self-assessment Tax Return. One Declaration will be required per taxpayer, rather than per business or profit source. This will consolidate all of the information shown in the Quarterly Submissions (there may be multiple sets of Submissions if there is more than one business, or source of profit). The Final Declaration will also include other relevant information for that taxpayer, for example details of their investment income. Submission of this final Declaration is expected to be in line with the 31st January deadline for Self-assessment Tax Returns.
How are the reports submitted to HM Revenue and Customs (“HMRC”)?
Individual taxpayers, or their Agents acting on their behalf, must collect the data using specially designed software or on a spreadsheet. If a spreadsheet is used this must be physically uploaded using bridging software. The range of software solutions to assist with the reporting is still under development. Follow the link below for more information on the approved software options currently available.
Find software that works with Making Tax Digital for Income Tax – GOV.UK (www.gov.uk)
Are tax payment dates also changing?
At present no changes have been proposed to the dates on which tax payments are due. For individuals within the Self-Assessment regime payments on account may be required on 31 July and 31 January each year, with final balancing payments being due on 31 January following the end of the tax year.
Is anyone exempt from MTD for ITSA?
If a taxpayer is exempt from MTD for VAT because of one of the reasons set out below, it is expected that they will also be exempt from these new provisions for ITSA for the same reason:
- It’s not reasonably practicable for them to use digital tools to keep their business records or submit quarterly returns due to age, disability, remoteness of location or any other reason (often referred to as ‘digital exclusion’).
- They are subject to an insolvency procedure.
- The business is run entirely by practising members of a religious society or order whose beliefs are incompatible with using electronic communications or keeping electronic records.
Other taxpayers that may be exempt from the regime will include:
- Non-resident companies
- Trustees, executors and administrators
- Foreign businesses of non-UK domiciled individuals
- Foster carers
- Those with no National Insurance Number
If a taxpayer believes they are exempt from the new provisions they must apply to HMRC, setting out the reasons they believe they are exempt and await a decision. HMRC should respond to the taxpayer within 28 days confirming the position.
Where can I find more information to help me get started?
If you think you may be impacted by MTD for ITSA it is important to start making preparations as soon as possible. There is a lot of information available to assist you. A good place to start is the guidance included on HMRC’s website.
Sign up voluntarily for Making Tax Digital for Income Tax – GOV.UK (www.gov.uk)
