What Is Making Tax Digital for Income Tax Self Assessment (MTD for ITSA)? A Beginner’s Guide for Small Businesses and Landlords

An easy-to-understand introduction to Making Tax Digital for Income Tax Self Assessment (MTD for ITSA): what it is, why it was introduced, who it applies to, the key MTD deadlines, and what happens if you do not start using compatible software in time.

What is Making Tax Digital (MTD)? 

Making Tax Digital (MTD) is a UK government programme run by HMRC. It changes how you keep records and how you send information to HMRC. Instead of waiting until the end of the year to total everything up, you keep digital records during the year and use compatible software to send quarterly updates, then finalise your figures after the year ends.

The goal is simple: reduce mistakes that creep in when numbers are re‑typed or added up late, and give you a clearer view of your likely tax bill while there is still time to plan for it. For Income Tax, MTD focuses on sole traders and landlords who are over the income thresholds explained below.

Who does Making Tax Digital apply to? MTD for Small Business and MTD for Landlords

MTD for Income Tax (often called MTD for ITSA) applies to individuals who run a sole‑trader business and/or receive property income once they exceed HMRC’s qualifying‑income thresholds. If you have more than one business or both business and property income, MTD will cover each source.

Not over the threshold yet? You can sign up voluntarily at any time. HMRC calls this “voluntary sign‑up.” As a volunteer you keep digital records and send quarterly updates using compatible software, but late‑submission penalty points and penalties for quarterly updates do not apply while you’re volunteering. It’s a safe way to learn the workflow and build good habits before it becomes mandatory for you.

Does Making Tax Digital apply to VAT too?

Yes, but it’s a separate strand. MTD for VAT has already been rolled out to all VAT‑registered businesses. It requires you to keep VAT records digitally and submit VAT Returns through MTD‑compatible software.

If you’re VAT‑registered and you’re a sole trader or landlord over the MTD for Income Tax thresholds, you’ll be in both regimes at once. In practice, you’ll keep one digital set of books and your software will do two jobs: create your VAT Returns and also compile your quarterly Income Tax updates. If you’re VAT‑registered but below the Income Tax thresholds, you continue with MTD for VAT only until the Income Tax start date applies to you.

Good to know: you can sign up voluntarily to MTD for Income Tax before you’re required to. You’ll still send quarterly updates, but there are no late‑submission penalties for missing quarterly update deadlines while you’re volunteering. It’s a low‑risk way to get comfortable with the process ahead of mandation.

When do you need to join? Key MTD Deadlines and Thresholds

MTD for ITSA becomes mandatory in stages. HMRC looks at your qualifying income (the total of your self‑employment and property income before expenses) on your recent Self Assessment to decide when the rules apply to you. 

Start dates:

• From 6 April 2026: qualifying income over £50,000

• From 6 April 2027: qualifying income over £30,000

• From 6 April 2028: qualifying income over £20,000

Once you are mandated, your first year under MTD begins on 6 April and your software will guide you through capturing records and sending updates.

What are the quarterly update deadlines under MTD?

After you join MTD, you send a summary update every quarter for each business and/or property income source. If you use the standard tax‑year quarters (6 April–5 April), the deadlines are:

Prefer calendar quarters? You can choose quarters ending on the last day of the month. The due dates stay the same: 7 August, 7 November, 7 February, and 7 May. Your software will show which quarters you’ve chosen and keep the timetable straight for you.

What happens at the end of the tax year?

When the year finishes, you review your figures in your software, make any end‑of‑year adjustments, and submit two things: an End of Period Statement (EOPS) for each business or property source, and your Final Declaration (which replaces the Self Assessment tax return). The deadline remains 31 January following the end of the tax year. Nothing extra is due for earlier in‑year estimates – those are there to keep you on track.

What are “digital records” under MTD? MTD Digital Records Explained

Under MTD you maintain digital records for your sole‑trader (self‑employment) and property income. In this guide, “self‑employment” means running a business as a sole trader; other structures (for example, partnerships) have different plans and timelines and are not covered here.

Each entry should capture the date, amount, and the type of income or expense (for example, sales, advertising, office costs, repairs and maintenance). Keeping this information digitally means totals can flow straight into your quarterly updates and your year‑end return without re‑keying.

Do you need “digital links” and can you use spreadsheets?

You can meet the rules with compatible bookkeeping software, or by using bridging software that connects spreadsheets to HMRC (both routes are permitted by HMRC). Our recommendation: keep things simple in a single app. EasyInvoice is the path we advocate – one place for your digital records, invoicing and receipt capture, and (via our upcoming MTD for ITSA features) the ability to send quarterly updates and complete the Final Declaration. If you currently rely on spreadsheets, you can keep them for working notes but centralise your official records in EasyInvoice to remove extra steps and reduce re‑keying errors.

You only need digital records for business and property income and expenses. Other income (like PAYE employment, pensions, savings or dividends) can be entered within your yearly tax return section of the software.

Join the EasyInvoice Waiting List today to get early access, smart tools, and a smoother start to Making Tax Digital.

How does MTD for ITSA change the way you submit your taxes? MTD for ITSA explained step by step

Day to day, you keep digital records of your sole‑trader and/or property transactions in HMRC‑compatible software. That means entering the amount, date, and category for each item so the totals are ready for reporting.

Four times a year you submit a summary update for each income source by the standard deadlines (7 August, 7 November, 7 February, 7 May). These are summaries—not individual transaction listings.

After the tax year ends, you make any necessary adjustments and submit (1) an End of Period Statement (EOPS) for each business/property source and (2) your Final Declaration (which replaces the Self Assessment tax return) by 31 January.

How EasyInvoice fits in. You’ll need software that is compatible with MTD for ITSA. Our aim with EasyInvoice is to make adding digital records straightforward and to support MTD submissions when they go live for small businesses and landlords. In the meantime, you can keep records in EasyInvoice and join the waitlist for the new feature.

What happens if you don’t use compatible software in time? MTD Deadlines and Penalties

If MTD applies to you and you miss a submission deadline, HMRC can apply late‑submission penalties under its points‑based system. Penalties build up when deadlines are missed, and separate charges and interest can apply if tax is paid late.

Leaving setup until the last minute increases the risk of errors and missed deadlines. The safest move is to choose HMRC‑compatible software early, start keeping digital records from day one, and rehearse your first quarterly update before it is due.

Not yet required to join? You can sign up voluntarily to get used to the process in a low‑pressure way. You’ll still send quarterly updates, but HMRC does not apply late‑submission penalties for missing quarterly‑update deadlines while you’re volunteering.

What is “qualifying income” and how is it checked?

Qualifying income means your total income from self‑employment and property (before expenses). HMRC checks your most recent Self Assessment return to decide if you’re over the threshold and will write to you to confirm when you must start using MTD. It is still your responsibility to prepare and sign up in time.

Which MTD software should you use? Choosing MTD‑Compatible Software

HMRC doesn’t recommend specific brands, but it provides a software finder tool and guidance on:

• What your software needs to do (create digital records, send quarterly updates, submit your tax return)

• The types of software available (full bookkeeping tools vs bridging software for spreadsheets)

• Features to consider (support for multiple income sources, calendar vs standard update periods, agent access, and pricing)

Your MTD next steps

• Check your qualifying income (add up your sole-traider and property income)

• Confirm your start date based on the thresholds above

• Pick compatible software (full bookkeeping software or bridging software for spreadsheets)

• Set up now so you’re ready for your first quarterly update by 7 August after your start date

• Keep digital records throughout the year and submit your Final Declaration by 31 January

Join the EasyInvoice Waiting List today to get early access, smart tools, and a smoother start to Making Tax Digital.