Making Tax Digital for Self-Employed: What It Is and What You Need to Do

Making Tax Digital (MTD) is a HMRC programme to move tax record keeping and filing from paper and spreadsheets to digital systems. For VAT, it has been live since 2019. For Income Tax Self Assessment (ITSA), the rollout began in April 2026 for the highest-income self-employed people and landlords, with further waves to follow. If you haven't looked into MTD for ITSA yet, now is the time.

What Making Tax Digital for ITSA actually requires

MTD for ITSA changes two things about how you interact with HMRC:

Digital record keeping — your income and expense records must be held digitally in HMRC-compatible software (not paper, not a standard spreadsheet)
Quarterly updates — instead of a single annual tax return, you submit four quarterly updates per year plus a final declaration

This doesn't change the amount of tax you pay — it changes the frequency of reporting and the format of records. The annual calculation is the same; it's the process that changes.

Who it applies to and when

| Income level | Start date | |---|---| | Qualifying income above £50,000 | April 2026 | | Qualifying income above £30,000 | April 2027 | | Qualifying income above £20,000 | Announced for future — date TBC |

"Qualifying income" means self-employment income and/or property rental income (before expenses). Employment income from PAYE does not count toward the threshold.

If you have self-employment income of £55,000, you are in scope from April 2026. If you have employment income of £100,000 and self-employment income of £12,000, you are not yet in scope (self-employment income below the current threshold).

The quarterly update cycle

Under MTD for ITSA, the tax year is divided into four quarters. At the end of each quarter, you submit a digital summary of your income and expenses to HMRC using compatible software. The quarters and deadlines are:

| Quarter | End date | Submission deadline | |---|---|---| | Q1 (April to June) | 5 July | 5 August | | Q2 (July to September) | 5 October | 5 November | | Q3 (October to December) | 5 January | 5 February | | Q4 (January to March) | 5 April | 5 May |

The quarterly submission is a summary of income and expenses — it's not a formal filing and does not trigger a tax payment. It is essentially an update of your running financial picture for the year. Corrections and adjustments are made in the final declaration.

Final declaration: At the end of the year, you submit a final declaration — the MTD equivalent of the annual Self Assessment return. This reconciles all quarterly updates, adds any additional income or reliefs (personal allowance, pension contributions, etc.), and produces the final tax calculation. The final declaration is due by 31 January — the same date as the current annual return.

The compatible software requirement

MTD for ITSA records must be held in HMRC-recognised compatible software. HMRC maintains a list of approved software, which includes:

Accounting packages: Xero, QuickBooks, Sage, FreeAgent
Dedicated MTD apps: Coconut, TaxScouts, Bokio
Bridging software: some tools allow you to maintain records in a spreadsheet and use bridging software to submit the quarterly update digitally

Paper records or a standard Excel/Google Sheets spreadsheet without bridging software do not meet the MTD digital requirements. This is the most significant practical change for the many self-employed people who currently keep records manually.

What if you're not yet in scope

If your income is below the current threshold, you are not yet required to use MTD for ITSA — but you can join voluntarily. HMRC encourages voluntary adoption as it helps you get familiar with the software and process before it becomes mandatory for you.

If you're below £30,000 in qualifying income, mandatory MTD is still years away (the £20,000 threshold date hasn't been confirmed). However, adopting digital records now — even if not required — has benefits:

Cleaner financial records
Easier preparation of the annual SA return
No disruption when your income crosses the threshold
Some software packages automatically reconcile bank transactions, saving hours of manual work

Exemptions

HMRC has published limited categories of exemption from MTD for ITSA:

Those with disability or illness preventing use of digital technology
Those in areas with no viable internet access (broadband not available and mobile data not accessible)
Insolvent individuals subject to certain proceedings
Religious objection to using computers (narrow)

Exemptions must be applied for through HMRC — they are not automatic. The threshold for claiming exemption is high; HMRC expects most people to be able to use some form of digital tool.

The impact on your tax timeline

Under the current system, your Self Assessment year-end data doesn't need to be gathered until January — giving you up to 10 months after the end of the tax year. Under MTD for ITSA, you need up-to-date records within 30 days of each quarter end.

This is a significant change in working pattern for anyone who currently catches up on bookkeeping once a year. The discipline required is closer to monthly bookkeeping: keeping records current, categorising expenses promptly, and reconciling your bank account quarterly.

The upside of this shift is visibility. Quarterly updates mean you have a running picture of your likely annual tax bill — rather than discovering your total liability in January. Combined with a tool like the Self Assessment Estimator, quarterly record keeping makes it much easier to set aside the right amount of tax throughout the year.

What you need to do now

If your qualifying income is above £50,000, you are in scope from April 2026 and should already be using compatible software. If you haven't made the switch, act immediately:

Choose an HMRC-recognised compatible software package
Migrate your existing records into the software or set up from April 2026
Set up bank feeds or regular reconciliation within the software
Submit your Q1 quarterly update (April–June) by 5 August 2026

If your income is between £30,000 and £50,000, you have until April 2027 to prepare. Use this time to select software and build the habit of regular record keeping.

If you're below £30,000, monitor HMRC announcements for the next threshold date and begin evaluating compatible software in advance.

Choosing software

When selecting compatible software, consider:

Cost: ranges from free (some entry-level apps) to £30–£50/month for full accounting packages
Bank feeds: automatic import of transactions from your business bank account
Receipt capture: mobile app for photographing receipts
Ease of use: whether the interface is intuitive for your level of accounting knowledge
Accountant compatibility: if you use an accountant, check they can access your software

For sole traders with simple income (one revenue stream, moderate expenses), a lightweight app is often sufficient. For more complex situations — multiple income streams, VAT-registered, employing staff — a fuller accounting package makes sense.

HMRC's full list of compatible software is at gov.uk/guidance/find-software-thats-compatible-with-making-tax-digital-for-income-tax. This is regularly updated as more products receive approval.

The broader picture

MTD for ITSA represents the most significant change to UK personal tax administration in decades. The move to digital records and quarterly reporting is a one-time adjustment — painful for some in transition, but ultimately producing cleaner records, better year-round visibility of tax liability, and a reduction in the January scramble that most self-employed people currently experience.

The Expenses Checker can help you identify and categorise your allowable expenses correctly as you set up your digital record keeping system.