Making Tax Digital (MTD) for Self-Employed

Everything you need to know about MTD for Income Tax Self Assessment and how it affects your business.

Last updated: 15 July 2026

What is MTD for Income Tax?

Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) is HMRC's initiative to modernise the tax system. It requires self-employed individuals and landlords to keep digital records and submit quarterly updates to HMRC using MTD-compatible software.

MTD replaces the traditional annual Self Assessment tax return with more frequent digital reporting, giving you a clearer picture of your tax position throughout the year.

Who Needs to Comply?

From April 2026

Self-employed individuals and landlords with qualifying income over £50,000 must comply with MTD for Income Tax.

From April 2027

The threshold drops to include those with qualifying income over £30,000.

Future Changes

HMRC has indicated the threshold may be lowered further in the future, potentially to £20,000 or below.

Qualifying income includes gross income from self-employment and/or property before deducting expenses or allowances. If you have both, the combined total is used.

What You'll Need to Do

Keep Digital Records

All business income and expenses must be recorded digitally using MTD-compatible software. Spreadsheets alone will not be sufficient.

Submit Quarterly Updates

Send a summary of your business income and expenses to HMRC every quarter, within one month of the quarter end.

End of Period Statement (EOPS)

After the tax year ends, submit a finalised summary of your business income and expenses, confirming the figures are complete and accurate.

Final Declaration

Submit a final declaration (replacing the Self Assessment return) confirming all income sources, claiming reliefs, and agreeing your tax liability.

Quarterly Reporting Deadlines

Standard Quarter Dates

Quarter 1

6 April – 5 July

Due by 5 August

Quarter 2

6 July – 5 October

Due by 5 November

Quarter 3

6 October – 5 January

Due by 5 February

Quarter 4

6 January – 5 April

Due by 5 May

What Software Will You Need?

You'll need to use software that is recognised by HMRC as MTD-compatible. This includes popular options like QuickBooks, Xero, and FreeAgent, among others.

What the Software Must Do

Record income and expenses digitally, submit quarterly updates to HMRC, generate end-of-period statements, and submit the final declaration.

Spreadsheets Are Not Enough

While spreadsheets can be used for record keeping, they must be linked to compatible software via an API to submit data to HMRC.

What Are the Penalties for Non-Compliance?

HMRC is introducing a new points-based penalty system for late submissions and late payments:

Late Submission Penalties

You'll receive a penalty point for each late quarterly update. Once you reach the threshold (4 points for quarterly obligations), you'll receive a £200 penalty for each subsequent late submission.

Late Payment Penalties

Penalties apply if tax remains unpaid 15 days after the due date, with additional charges at 30 days and after 12 months. Interest also accrues on overdue amounts.

How We Can Help

Transitioning to MTD doesn't have to be stressful. At 360 Accounts & Bookkeeping, we handle the entire process for you:

Software Setup

We'll set up MTD-compatible software for your business and ensure it's linked to HMRC.

Quarterly Submissions

We prepare and submit all quarterly updates on your behalf, ensuring accuracy and compliance.

Year-End Compliance

We handle the end-of-period statement and final declaration, so you never miss a deadline.

Common Questions

Making Tax Digital (MTD) for Self-Employed FAQs

From April 2026, self-employed individuals and landlords with qualifying income over £50,000 must comply. From April 2027 the threshold drops to £30,000, and HMRC has indicated it may be lowered further in the future, potentially to £20,000 or below.

Your gross income from self-employment and/or property before deducting any expenses or allowances. If you have both self-employment and property income, the combined total is used to decide whether you're over the threshold.

Every quarter, within one month of the quarter end. The standard quarters run 6 April to 5 July (due 5 August), 6 July to 5 October (due 5 November), 6 October to 5 January (due 5 February), and 6 January to 5 April (due 5 May). After the tax year ends you also submit an End of Period Statement and a final declaration.

Effectively, yes. MTD replaces the traditional annual Self Assessment return with quarterly digital updates, an End of Period Statement confirming your figures are complete and accurate, and a final declaration confirming all income sources, claiming reliefs, and agreeing your tax liability.

Not on their own. All business income and expenses must be recorded digitally using MTD-compatible software such as QuickBooks, Xero, or FreeAgent. Spreadsheets can still be used for record keeping, but they must be linked to compatible software via an API to submit data to HMRC.

HMRC is introducing a points-based system. You get a penalty point for each late quarterly update, and once you reach 4 points you receive a £200 penalty for each subsequent late submission. Late payment penalties apply if tax remains unpaid 15 days after the due date, with additional charges at 30 days and after 12 months, plus interest on overdue amounts.

Sources

Rates and thresholds on this page come from the official HMRC and Companies House guidance below. Tax rules change, so check the source if you are relying on a figure.

Would you rather we handled this for you? See our Self Employed MTD service, or read the full set of guides.

Ask us about your situation

Need help with this?

Let our expert accountants handle it for you so you can focus on running your business.