MTD for ITSA: Overview

Introduction Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) is part of an initiative developed by HM Customs & Revenue (HMRC) to modernise tax collection in the UK. It requires most unincorporated businesses, the self-employed and landlords with an income above the £50,000 threshold to keep certain records in digital form and submit their quarterly returns using software that meets HMRC specifications.

This factsheet explains the background of MTD, what its requirements are, which businesses are affected and how to start complying with MTD. The factsheet also provides sources of further information and support.

Background MTD is a programme of changes to the way that taxation is managed in the UK, intended to make the tax system more efficient and simpler to operate.

Eventually, MTD will be expanded to also cover corporation tax. However, it is being implemented gradually, with VAT (value added tax) being the first tax to transition to the new system followed by Income Tax Self Assessment.

Requirements of MTD for ITSA

Unincorporated businesses, the self-employed and landlords were due to be the first group to come within MTD, but this has been pushed back several times and will now be implemented from April 2026. Although general partnerships will not be required to join MTD for ITSA until the tax year beginning on 6 April 2027 and the date when all other partnerships will be required to join is to be confirmed later

Under MTD for ITSA:

• unincorporated businesses, self-employed people and landlords (with income over £50,000) will be required to:

  • keep income and expense records digitally;

  • file quarterly updates of income and expenses to HMRC through software or an app within one month of the end of the quarter; and

  • submit an end of year declaration to HMRC through their digital tax account by 31 January following the end of the tax year;

Obligations

A business will need to file quarterly updates to HMRC within one month from the end of the quarter and complete an end-of-year exercise by the earlier of ten months after the last day of the period of account and 31 January. For partnerships, the obligation of complying with MTD will fall on the nominated partner.

Form of the quarterly report

Businesses which are eligible for three-line accounts will be able to submit a quarterly update with only three lines of data – income, expenses and profit.

Exclusions

Based on the legislation the following will be excluded from MTD:

• a person who is digitally excluded because of their religious beliefs or because they can't reasonably be expected to comply with MTD. Note: A partnership will be digitally excluded if all of the partners are digitally excluded;

• the trustees of a charitable trust;

• the trustees of an exempt unauthorised unit trust; and

• a person in respect of an excluded activity, being: the underwriting business of a member of Lloyd's, holding shares in a Real Estate Investment Trust (REIT) and participating in an open-ended investment company. This extends to a partnership where all of the activities of the partnership are excluded activities.

A person falling within the second to fourth bullet points above will have the option of electing into MTD.

There is to be an income threshold of £50,000 – the Low Income Exemption – under which MTD for ITSA does not apply.

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