Making Tax Digital

Making Tax Digital for Income Tax — clear guidance and practical support

What is Making Tax Digital (MTD ITSA)?

MTD ITSA is part of HMRC’s move towards fully digital tax reporting. Instead of submitting one annual tax return, affected taxpayers will:

• Keep digital records of income and expenses
• Submit quarterly updates to HMRC
• Complete a finalisation statement after the tax year ends

For those within scope, this replaces the traditional Self Assessment tax return.

Who does MTD apply to?

MTD ITSA applies to sole traders and landlords whose gross income (before expenses) exceeds:

• £50,000 from 6 April 2026
• £30,000 from 6 April 2027
• £20,000 from 6 April 2028

Some individuals may be exempt, including those with complex affairs or limited digital access. We can help determine whether MTD applies to you.

Quarterly reporting – how it works

Under MTD, you’ll submit four quarterly updates each tax year. These show cumulative totals for income and expenses, helping HMRC build a clearer picture throughout the year.

Quarterly deadlines: 7 August, 7 November, 7 February, 7 May.

Each submission includes the reporting period start and end dates and total income and expense figures (using HMRC categories). If mistakes are found later, they can be corrected in future updates.

End-of-year finalisation statement

After the tax year ends, you’ll submit a finalisation statement by 31 January, similar to the current Self Assessment deadline. This allows you to make adjustments to quarterly figures, declare other income (dividends, pensions, etc.), and claim allowances and tax reliefs.

From April 2026, HMRC’s free online tax return service will no longer be available to those within MTD — approved software will be required.

Software requirements

You’ll need MTD-compatible software that can keep and store digital records, submit quarterly updates, submit the finalisation statement, and receive tax estimates. Popular options include Xero, FreeAgent, and Sage. We’ll help you choose the right software and set it up correctly.

Paying your tax

MTD changes how you report, not how you pay. Tax payments remain the same: two payments on account (31 January & 31 July) and a balancing payment (31 January after the tax year ends).

Late submission penalties

From April 2027, HMRC’s new points-based penalty system applies. Each missed deadline earns a penalty point; reaching the threshold triggers a £200 fine; points expire after a period of compliance. Even if no tax is owed, submissions must be made on time.

How AIM GB Ltd can help

MTD is a big change — but with the right support, it doesn’t need to be a burden. We help sole traders and landlords with MTD readiness checks, software setup and training, quarterly reporting, and ongoing compliance support. For every new client, we plant a tree as part of our green initiative.