Don’t feel tempted to ignore Making Tax Digital for Income Tax Self Assessment (MTD for ITSA). Landlords and self-employed people with annual income over £50,000 must make their first digital submission by 7th August.
If you’re affected, you must register and make your submissions from property and self-employment online. You must then provide four quarterly updates. If you also have income from employment, dividends or pensions, for example, you must submit this information with your Final Declaration. Here are some things to think about.
Has HMRC contacted you?
HMRC wrote to most affected taxpayers in February and March this year, based on their 2024/25 tax return. However, you may not have received a letter, even though MTD for ITSA applies to you. If so, you must act immediately if you haven’t already registered and started digital record keeping.
The MTD for ITSA rules
The rules apply to you if you:
are a sole trader, freelancer, or self-employed
receive rental income from UK or overseas properties
have combined gross income from these sources over £50,000.
The qualifying in come is what you declared in your 2024/25 return, filed on or before 31 January 2026.
It’s important to remember that the threshold is based on income before expenses.
From April 2027 this threshold goes down to £30,000 and to £20,000 from April 2028.
MTD for ITSA doesn’t currently apply to income from partnerships.
What you must do if MTD for ITSA applies to you
Previously you would make a single Self Assessment Tax (SAT) return each tax year (6th April to 5th April the following year). You would do this if you:
were self-employed as a ‘sole trader’ and earned more than £1,000 before expenses
you were a partner in a business partnership
paid Capital Gains Tax when you sold something that increased in value
don’t pay your High Income Child Benefit Charge through PAYE
are an off-payroll worker repaying a student or postgraduate loan.
You may also provide a SAT return if you have any untaxed income, such as:
money from renting out a property
tips and commission
income from savings, investments and dividends
foreign income.
If MTD for ITSA applies to you, you must now separate your income. For your self-employed and rental income, you must:
Keep continuous digital records. You must record all your income and expenses digitally using HMRC compatible software. You must include the date, amount, and category of income and spending. You could still use a spreadsheets linked to suitable software, but the whole process is digital.
Submit quarterly updates. Each quarter you must send a summary of your income and expenses to HMRC using your software. The deadlines are:
7 August for the quarter ending 5 July
7 November for the quarter ending 5 October
7 February for the quarter ending 5 January
7 May for the quarter ending 5 April.
However, you will still pay your income tax on 31 January and 31 July.
Submit a Final Declaration. As now, you will also need to provide a final statement by 31 January following the end of the tax year. If MTD for ITSA applies to you this tax year, you must make your Final Declaration by 31 January 2028.
What happens if you miss MTD for ITSA deadlines
HMRC says, for this tax year only, if you miss your quarterly deadlines, you won’t face late submission penalties. However, if you miss your Final Declaration deadline or tax payments you will receive penalties. After the first year, missing a quarterly deadline will result in a penalty point. Four penalty points lead to a £200 fine. The process escalates from there. Once you make your submissions the points will slowly disappear.
If you’re unsure whether MTD for ITSA applies to you we’re happy to give you some advice, so please get in touch.
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