What Is MTD IT, and How Will It Affect Self-Employed Individuals?

J.Rakowska
Apr 29
2 min read

Updated: 3 days ago

Making Tax Digital for Income Tax (MTD IT) represents a major shift in how self-employed individuals and landlords across the UK manage and report their taxes. It forms part of the government’s wider plan to modernise the tax system, aiming to make it more efficient and reduce errors.

If you are self-employed, these changes are likely to influence the way you record your income and file your tax returns. Let’s take a closer look at what MTD IT entails, how it might affect you, and the steps you should take to stay compliant.

What Is MTD IT?

MTD IT stands for Making Tax Digital for Income Tax. It extends the existing Making Tax Digital (MTD) programme, which currently covers VAT, to income tax. The focus is on streamlining the process for reporting income tax for:

Self-employed individuals
Landlords with annual rental income

Under MTD IT, you will be required to:

Keep digital records of your income and expenses.
Submit quarterly updates to HMRC using MTD-compliant software.
Complete an End of Period Statement (EOPS) and a Final Declaration to confirm your yearly income and tax obligations.

Who Will MTD IT Apply To?

MTD IT will apply to:

Self-employed individuals and landlords earning more than £50,000 annually from April 2026.
Those with income between £30,000 and £50,000 from April 2027.

HMRC is still reviewing how MTD IT might apply to those with annual incomes below £30,000, so it’s important to keep an eye out for future updates.

How Will MTD IT Affect You?

Digital Record-Keeping
If you currently rely on paper records or spreadsheets, you’ll need to move to MTD-compliant software to maintain your accounts digitally.
Quarterly Submissions
Instead of filing one Self Assessment tax return per year, you will be required to send four quarterly updates to HMRC, giving a regular overview of your income and expenses.
Year-End Reporting
You’ll still need to finalise your annual accounts, but the process will be streamlined through digital tools.
Greater Transparency
Frequent updates will give you a clearer understanding of your tax position throughout the year, reducing the risk of unexpected tax bills.

How to Prepare for MTD IT

Check Whether MTD IT Applies to You
Review your annual income from self-employment or property to see when you must comply.
Select MTD-Compatible Software
Popular choices such as QuickBooks, Xero, and FreeAgent meet MTD requirements and will help you manage your digital records and submissions.
Organise Your Financial Records
Make sure your income and expenses are accurately documented. If you’ve been using paper receipts, now is the time to switch to a digital system.
Learn the New Procedures
Familiarise yourself with how to complete quarterly updates, the End of Period Statement, and the Final Declaration.
Seek Expert Advice
As MTD ITSA can be complex, consulting an accountant can ensure you meet all requirements smoothly.