What is "Making Tax Digital for Income Tax (MTD IT)" and what does it mean for the self-employed?

Isobel Chaplin •

May 3, 2025

Making Tax Digital for Income Tax (MTD IT, or MTD ITSA, adding Self-Assessment to the end) is a significant change in how self-employed individuals and landlords in the UK manage and report their taxes. It’s part of the government’s initiative to modernise the tax system, to make it more efficient and less error-prone.

If you’re self-employed, this change will likely affect how you record your income and submit your tax returns from 2026 onwards.

Let’s explore MTD IT, how it will impact you, and what steps you need to take to ensure compliance.

🔹What is MTD IT?

MTD IT stands for Making Tax Digital for Income Tax. It’s an extension of the government’s Making Tax Digital (MTD) initiative, which already applies to VAT. MTD IT focuses on streamlining the process of reporting income tax for:

Self-employed individuals
Landlords with annual rental income

Under MTD IT, you’ll need to:

Keep digital records of your income and expenses.
Submit quarterly updates to HMRC through MTD-compatible software.
File an End of Period Statement (EOPS) and a Final Declaration to confirm your annual income and tax obligations.

🔹Who does MTD IT apply to?

MTD IT will apply to:

Self-employed individuals and landlords with an annual business or property income exceeding £50,000 starting from April 2026
Those with income between £30,000 and £50,000 starting from April 2027

HMRC is still consulting on how MTD IT will apply to individuals earning below £30,000 annually, but staying informed about future changes is essential.

🔹How will MTD IT affect you?

Digital Record-Keeping

If you’re used to keeping paper records or spreadsheets, you’ll need to switch to MTD-compatible software to maintain your records digitally.

2. Quarterly Reporting

Instead of filing a single Self Assessment tax return once a year, you’ll submit four quarterly updates to HMRC. These updates will provide a snapshot of your income and expenses throughout the year.

3. End of Year Submissions

You’ll still need to finalise your accounts and tax return at the end of the year, but the process will be streamlined through digital accounting software.

4. Increased Transparency

Regular updates will give you a clearer picture of your tax obligations throughout the year, which will help with reducing the risk of payment surprises at year-end.

🔹What do you need to do to prepare for MTD IT?

1. Determine If MTD IT Applies to You

Check your annual income from self-employment or property to see when you’ll need to comply with MTD IT.

2. Choose MTD-Compatible Software

Popular options like Xero, FreeAgent and other accounting softwares are all MTD-compatible. These tools will help you maintain digital records and submit quarterly updates seamlessly.

3. Organise Your Records

Ensure your income and expense records are accurate and up to date. If you’ve been relying on paper receipts up until now, it’s time to transition to a digital system. Not only is this mandatory for MTD IT but it will also help you to stay on top of your bookkeeping do it’s not a bigger task as the end of the year.

4. Learn the New Process

Familiarise yourself with how to submit quarterly updates, end-of-period statements, and the Final Declaration.

5. Seek Professional Advice

Navigating MTD IT can be complex, especially if you’re new to digital accounting, which is where a trusted accountant can guide you through the transition and ensure compliance.

🔹How we can help

At IJC Finance, we understand the challenges that MTD IT presents for self-employed individuals and landlords and our goal is to make the transition as smooth and stress-free as possible.

Here’s how we can support you:

Expert Guidance

We’ll help you understand how MTD IT affects your specific situation and create a plan to ensure compliance.

Software Setup and Training

Choosing and setting up MTD-compatible software can be overwhelming, so we can help with recommending the best option for your needs, handle the setup process for you, and also provide the relevant training to get you up to speed.

Quarterly Reporting Support

We’ll assist with preparing and submitting your quarterly updates to HMRC, ensuring accuracy and timeliness.

Year-End Submissions

From the End of Period Statement to the Final Declaration, we’ll manage your year-end submissions so you can focus on running your business.

Ongoing Support

We’re here to answer your questions, troubleshoot any issues that arise, and provide peace of mind as you navigate the new world of MTD IT.

🔹Get Ready for MTD IT with IJC Finance

Making Tax Digital for Income Tax Self Assessment is a significant change to current practices, but you don’t have to face it alone. At IJC Finance, we’re experts in helping self-employed individuals and landlords transition to MTD seamlessly.

MTD IT FAQ: Everything You Need to Know

1. What is MTD IT?

MTD IT (Making Tax Digital for Income Tax) is part of HMRC’s initiative to modernise the tax system. It requires self-employed individuals and landlords to keep digital records of their income and expenses and submit quarterly updates to HMRC using MTD-compatible software.

2. Who does MTD IT apply to?

MTD IT applies to:

Self-employed individuals and landlords with annual business or property income exceeding £50,000 from April 2026
Those earning between £30,000 and £50,000 must comply from April 2027

Plans for individuals earning below £30,000 are still under consultation. You can find more information on the HMRC website.

3. When does MTD IT start?

April 2026: For individuals earning over £50,000 annually
April 2027: For individuals earning between £30,000 and £50,000 annually

4. What records do I need to keep digitally?

You’ll need to maintain digital records of:

Income
Expenses
Bank transactions related to your business or property

These records must be stored in MTD-compatible software and submitted to HMRC via quarterly updates.

5. How often do I need to report under MTD IT?

You’ll need to submit:

Four quarterly updates summarising your income and expenses throughout the year.
An End of Period Statement (EOPS) at the end of the tax year to confirm your figures.
A Final Declaration to declare all your income and confirm your tax liability.

6. What software do I need for MTD IT?

You’ll need MTD-compatible software to manage your records and submit updates. Popular options include:

Xero
FreeAgent
QuickBooks

We can help you choose the best software for your needs and set it up for you.

7. What happens if I don’t comply with MTD IT?

Failure to comply with MTD IT requirements may result in penalties from HMRC. These could include fines for late submissions or non-compliance with digital record-keeping rules.

8. Do I still need to file a Self-Assessment tax return?

No, MTD IT replaces the traditional annual Self-Assessment tax return. Instead, you’ll submit quarterly updates, an EOPS, and a Final Declaration through your MTD-compatible software.

9. How can IJC Finance help me with MTD IT?

We provide:

Expert advice tailored to your situation
Set-up and training for MTD-compatible software
Assistance with quarterly updates and year-end submissions
Ongoing support to ensure compliance and peace of mind

10. What should I do now to prepare for MTD IT?

Determine when MTD IT will apply to you based on your income
Choose and set up MTD-compatible software
Organise your records to ensure accuracy
Seek professional advice to streamline the transition

🔹Still Have Questions? We’re Here to Help!

IJC Finance specialises in helping self-employed individuals and landlords prepare for MTD IT. Whether you need help setting up software or understanding your obligations, we’re just a call away.