Making Tax Digital: Self Assessment for the Self-Employed & Landlords

Originally planned for 2024, Making Tax Digital for Self-Assessment (MTD for ITSA) is coming in April 2026.

With the aim of promoting better and more timely record keeping, which in turn is hoped will reduce errors and mistakes, MTD for ITSA will require self-employed businesses and landlords with qualifying income to maintain digital records and report quarterly using software to HMRC.

The government’s initiative aims to modernise the tax system, making it easier to get your tax right and keep on top of your affairs. But what exactly does this mean for you? In this blog post, we’ll explore what MTD for Self Assessment is, who it affects, and how you can prepare for the shift.

What Is Making Tax Digital (MTD)?

Making Tax Digital began in 2019, affecting certain VAT-registered businesses, and from April 2022, all VAT-registered businesses were made to comply. MTD is designed to make the tax system more efficient and easier to navigate, and from April 2026, it requires individuals and businesses to keep digital records and submit tax information to HMRC using compatible software.

Who Will Be Affected?

MTD for Self Assessment primarily affects self-employed individuals (sole traders) and landlords with business or property income over £30,000 per year. Interestingly, when MTD for ITSA was scheduled to come into effect in 2024, the income threshold was initially planned to be £10,000 per year. It will be launched in two stages as follows:

• Qualifying income over £50,000 from April 2026

• Qualifying income over £30,000 from April 2027

It is important to note that the above figures are before any deductions for costs and expenses. If your income is below the £50,000 and £30,000 thresholds, you will not be affected; however, you should be aware that as soon as it does, you will need to comply, and at the same time be aware of any future changes which may affect you.

The Government says that it is committed to introducing MTD for ITSA for partnerships; however, there is nothing on the horizon.

What Will Change?

Currently, most self-employed people and landlords complete a Self Assessment tax return once a year. Under MTD for ITSA, you’ll need to:

• Keep digital records of your income and expenses

• Send quarterly updates to HMRC through MTD-compatible software

• Submit a final end-of-period statement and a final declaration at the end of the tax year

Quarterly Updates

The quarterly updates will, by default, follow the tax year. However, there will be the option to select calendar quarters as follows:

Default (Tax Year Quarters):

• Quarterly update 1: 6 April – 5 July → Filing deadline: 7 August
• Quarterly update 2: 6 April – 5 October → Filing deadline: 7 November
• Quarterly update 3: 6 April – 5 January → Filing deadline: 7 February
• Quarterly update 4: 6 April – 5 April → Filing deadline: 7 May

Calendar Quarters (if elected):

• Quarterly update 1: 1 April – 30 June → Filing deadline: 7 August
• Quarterly update 2: 1 April – 30 September → Filing deadline: 7 November
• Quarterly update 3: 1 April – 31 December → Filing deadline: 7 February
• Quarterly update 4: 1 April – 31 March → Filing deadline: 7 May

You will note that the filing deadlines are the same whether or not you elect for Calendar Quarters.

After four quarterly submissions, an MTD return similar to the current Self-Assessment Return will have to be filed. This will be due by the normal Self-Assessment deadline of 31 January following the tax year. It is expected that the form will be pre-populated with the data from the four quarterly updates and will need to be adjusted for accounting and tax purposes. Any non-business income, such as salary, pension, or bank interest, will need to be reported at this stage; however, MTD aims to enable this data to be pre-populated, so it will be a case of checking it.

This may sound daunting, but the aim is to make tax affairs more manageable by breaking the process into smaller, regular chunks.

Key Benefits of Making Tax Digital

Making Tax Digital is designed to make managing your tax simpler, more accurate, and less stressful. By moving away from paper-based systems and spreadsheets, you gain more control and visibility over your finances.

Key benefits include:

• Fewer mistakes: Digital record-keeping reduces the risk of errors that often occur with manual data entry. HMRC-approved software can automatically update figures and flag inconsistencies, keeping your accounts more reliable.
• Real-time view of your tax position: Submitting quarterly updates means you’ll always have an up-to-date picture of your tax liability. This makes it easier to budget, forecast cash flow, and avoid surprises when the bill is due.
• Less pressure at year-end: Instead of facing a mountain of paperwork at the end of the tax year, your records are maintained throughout. This spreads the workload and makes the annual submission far smoother.
• Improved financial planning: With consistent and accurate records, you’ll be better placed to make informed decisions about investments, savings, and growth opportunities for your business.

How to Prepare for Making Tax Digital

Getting ready for MTD doesn’t have to be complicated. The key is to plan ahead and make small changes now, so the transition feels seamless when the rules apply to you.

• Check your obligations: Review your business and property income to confirm whether you fall within the scope of MTD and when you’ll need to join. Deadlines can vary depending on your circumstances.
• Select the right software: There’s a wide choice of MTD-compatible software, from straightforward apps ideal for sole traders to full accounting suites for larger businesses. Choose one that fits your needs and your budget.
• Embrace digital record-keeping early: Start tracking your income and expenses digitally now. Building this habit ahead of time will make the transition smoother and give you more confidence when MTD becomes mandatory.
• Get expert support if needed: Accountants and bookkeepers are already familiar with MTD requirements. They can advise on the best tools, guide you through set-up, and ensure your submissions are fully compliant with HMRC rules.

Common Questions on Making Tax Digital

Can I still use spreadsheets?

Yes, but only if you use bridging software to link your spreadsheet to HMRC’s system.

What if I have multiple businesses?

You’ll need to maintain separate digital records and submit them for each one.

Will HMRC offer free software?

No, but some providers do offer low-cost or free options for simple tax affairs.

Making Tax Digital: Key Takeaways

Making Tax Digital for Self Assessment is a significant change, but it’s designed to make tax simpler and more accurate. By preparing early and embracing technology, self-employed people and landlords can make the transition as smooth as possible. Don’t wait until the last minute; start getting ready now to stay compliant and avoid unnecessary headaches down the line.

For the most up-to-date information, always check the official HMRC website or speak to your TFMC contact.