What is MTD ITSA?

If you're a sole trader or landlord in the UK, you've probably heard about Making Tax Digital. But what is MTD ITSA exactly? MTD ITSA stands for Making Tax Digital for Income Tax Self Assessment. It's HMRC's initiative to modernise how self-employed people and landlords report their tax information. Instead of filing one annual Self Assessment return, you'll submit quarterly digital updates throughout the year.

What does MTD ITSA mean for you?

Under MTD ITSA, you must keep digital records of your business and property income and expenses. You'll send these to HMRC every quarter (or monthly if you choose), with quarters ending on 5 July, 5 October, 5 January, and 5 April. Each update is due within one month of the quarter end -for example, the quarter ending 5 July must be submitted by 7 August. At the end of the tax year, you submit an End of Period Statement (EOPS) and a Final Declaration, which replaces the traditional Self Assessment tax return for your business and property income. The EOPS includes accounts adjustments like capital allowances; the Final Declaration covers other taxable income, gains, and claims.

Who needs to use MTD ITSA?

You'll need to use Making Tax Digital for Income Tax if you're a sole trader or landlord registered for Self Assessment, you have income from self-employment or property (or both), and your qualifying income exceeds the threshold. The threshold depends on the tax year: over £50,000 for 2024–25 means you start from 6 April 2026; over £30,000 for 2025–26 means you start from 6 April 2027; and the government plans to extend to those over £20,000 for 2026–27. Your qualifying income is the combined turnover from all relevant self-employment and property sources before expenses.

What are digital records?

HMRC requires you to maintain digital records showing the value, date, and (where relevant) category of each transaction. You can use MTD-compatible software, or spreadsheets linked to HMRC via bridging software. HMRC does not provide its own software, but publishes a list of compatible providers. The key is that your records must be digital and capable of being submitted electronically.

Exemptions

Some people are exempt from MTD ITSA. This includes those who are digitally excluded (for example, due to age, disability, or lack of internet access), practising members of religious orders that forbid computer use, and certain other groups. You can apply to HMRC for an exemption if it's not reasonably practical for you to use digital software. If exempt, you continue to report via the traditional Self Assessment return. Limited companies are not in scope -MTD ITSA applies to individuals (sole traders and landlords). If you're a company director whose only income is salary and dividends, you don't need MTD ITSA.

Penalties and compliance

Late submissions attract penalty points under a points-based system. Once you reach the threshold, you receive a £200 fine, with additional fines for each subsequent late submission. The good news: HMRC is waiving penalties for late quarterly updates in the first year of MTD. There are no penalties for inaccurate quarterly updates as long as your final tax return is correct -so you can correct mistakes before the year end.

Understanding what is MTD ITSA is the first step to preparing. Once you know you're in scope, the next step is choosing software and getting your records in order. Quartax is built specifically for UK landlords and sole traders: upload your bank statement, review AI-categorised transactions, and submit to HMRC in one click.