Making Tax Digital for Income Tax (MTD for ITSA)

Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) is the next phase of the government's plan to modernise the UK tax system.

Under MTD for ITSA rules, individuals meeting the criteria will be required to keep their records electronically with digital links and file quarterly returns of mandated data to HM Revenue and Customs.

In addition to this, there will be a requirement to file an End of Period Statement (EOPS) and a Final Declaration. This will replace the current requirements for filing an annual Self-Assessment Tax Return for those individuals that meet the criteria.

Here is everything you need to know about MTD for ITSA.

Table of contents

What does the government say about MTD for ITSA?

According to the government’s policy wording:

There is a growing body of evidence, from research and insights from taxpayers already operating MTD VAT, which demonstrates that MTD is securing a range of benefits for those that use it in practice. MTD users are reporting that preparing and submitting returns is easier, and that MTD has increased their confidence in managing tax affairs and using technology.

Who will be affected by MTD for ITSA?

The first group of individuals that MTD for ITSA will apply to is sole traders and landlords with a total gross income from a trade or property let business of over £50,000. Those with an income of between £30,000 and up to £50,000 will need to do this from April 2027.

The following phases will include general partnerships and eventually complex partnerships and incorporated businesses.

HMRC will assess the criteria for MTD for ITSA based on the results for the tax year 2024/25, which is due for submission by 31 January 2026. This is in line with the go live date of April 2026.

What if you don’t meet the criteria yet but may in future?

For the tax year in which you meet the required criteria, the results would be included on your Self-Assessment Tax Return and would be due for submission by 31 January following the end of the tax year. You would then be brought into MTD from the following April with the results of the previous tax year still to be included on a final Self-Assessment Tax Return.

MTD for sole traders and landlords

Each sole trade business will be required to keep digital records of mandated data and submit separate quarterly returns and End of Period Statements (EOPS). For landlords, all rental properties will be treated as one rental property business, and they will be required to keep combined digital records of mandated data and submit one set of quarterly returns and EOPS.

How will MTD for ITSA work?

The first element is the requirement to keep digital records of mandated data using compatible software as follows:

• Accounting software packages that can be used to keep digital records and file returns via HMRC's Application Programming Interface (API).
• Spreadsheets with an inbuilt function to file returns via HMRC's API.
• Bridging software which can take return information from an existing spreadsheet and submit this to HMRC via their API.

What is mandated data for MTD?

The mandated data to be included in the quarterly self-assessment Income Tax returns are the categorised totals of the income received and expenditure incurred for each business/property portfolio.

The Final Declaration will bring together all of the mandated MTD for ITSA information already submitted with the non-mandated information such as employment, interest or dividend income and pension contributions and charitable donations to determine the final tax liability.

Unlike the quarterly returns and EOPS, only one Final Declaration is required, and this removes the requirement to file an annual Self-Assessment Tax Return.

Submitting quarterly Income Tax Self-Assessment returns

Under the new rules, individuals meeting the MTD for ITSA criteria must submit quarterly returns in accordance with the following deadlines:

Alternatively, you can make a ‘calendar quarter election’, which means you can draw up quarterly returns to the end of the previous month.  Where this election is made, the quarterly returns will be as follows:

What is an End of Period Statement (EOPS)?

Following the quarterly submissions, individuals will be required to make an EOPS submission making any relevant adjustments to the quarterly returns previously submitted. The deadline for filing an EOPS is 31 January following the end of the relevant tax year.

What is the Final Declaration?

Finally, there will be a requirement to submit a Final Declaration to HMRC, which brings together all of the information to determine the final tax liability including information from the EOPS and information on non-MTD sources of income.

The filing deadline for the annual data is the 31st of January, following the end of the tax year which is in line with Self-Assessment. 

This will replace the current Self-Assessment Tax Return but the deadline for submission and due dates for payments of tax liabilities will remain unchanged.

When will Making Tax Digital for Income Tax happen?

• The first phase of Making Tax Digital for Income Tax will take effect from April 2026 (sole traders and landlords).
• Mandation of MTD for ITSA will not be extended to general partnerships in 2025 as previously announced and will be introduced at a later date (to be confirmed).
• There is no confirmed date yet for the introduction of complex partnerships and incorporated businesses.

What happens if I no longer meet the MTD for ITSA criteria in a tax year?

It is more difficult to drop out of the MTD for ITSA criteria. You would need to have a consecutive three-year period of MTD income falling below the threshold. If your income drops below the threshold as a one off for that tax year, you will continue to be in MTD for ITSA.