MTD IT: Frequently Asked Questions

J.Rakowska
Apr 29
2 min read

Updated: 3 days ago

1. What is MTD IT?

Making Tax Digital for Income Tax (MTD IT) is a UK government initiative aimed at modernising the tax system. It requires self-employed individuals and landlords to:

Keep digital records of income and expenses.
Submit quarterly updates to HMRC using MTD-compatible software.
Complete an End of Period Statement (EOPS) and a Final Declaration annually.

2. Who needs to comply with MTD IT, and when?

MTD IT will be introduced in phases:

From 6 April 2026: Individuals with annual gross income over £50,000 from self-employment or property.
From 6 April 2027: Those with income between £30,000 and £50,000.
From 6 April 2028: Individuals earning over £20,000.

3. What qualifies as 'qualifying income'?

Qualifying income includes the total gross income (before expenses) from self-employment and property rental. HMRC assesses this based on your Self Assessment tax return.

4. What are the main requirements under MTD IT?

Under MTD IT, you must:

Maintain digital records of your income and expenses.
Submit quarterly updates summarising your income and expenses.
Complete an End of Period Statement (EOPS) to finalise your business income.
Submit a Final Declaration to confirm all income and tax due for the year.

5. Will I still need to file a Self Assessment tax return?

Yes, but the process changes. Instead of one annual return, you'll submit quarterly updates, an EOPS, and a Final Declaration. The traditional Self Assessment return will be replaced by these digital submissions.

6. What software do I need for MTD IT?

You'll need MTD-compatible software to:

Record income and expenses digitally.
Submit quarterly updates.
Complete the EOPS and Final Declaration.

HMRC provides a list of compatible software options, including free and paid versions.

7. Can I use spreadsheets for MTD IT?

Yes, but only if they're used in conjunction with bridging software that allows you to submit data to HMRC in the required format.

8. Are there any exemptions from MTD IT?

Exemptions may apply if:

It's not practical for you to use digital tools due to age, disability, or location.
You are a practising member of a religious society whose beliefs are incompatible with using electronic methods.

You must apply to HMRC for an exemption.

9. What happens if I don't comply with MTD IT?

Non-compliance can result in penalties. HMRC has introduced a points-based penalty system:

One point for each missed submission.
A financial penalty is charged once a points threshold is reached.

10. How can I prepare for MTD IT?

Assess your income to determine when MTD IT applies to you.
Choose MTD-compatible software suitable for your business needs.
Start keeping digital records of your income and expenses.
Consider signing up early to familiarise yourself with the process.

If you have further questions or need assistance with MTD IT, feel free to reach out. Staying informed and prepared will ensure a smooth transition to the new system.