From April 2026, HMRC is changing how certain individuals report their income. These changes fall under Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) — a system designed to modernise tax reporting and encourage more frequent, accurate updates using digital tools.
If you’re a sole trader or a landlord with income over £50,000, you’ll need to switch to quarterly reporting using HMRC-approved software. It’s a big change from the once-a-year Self Assessment many are used to — and we know it can feel like a lot to take in.
But the good news is that if you already submit VAT returns or keep digital records, you’re part of the way there. And if you’re working with us, you’re not alone in navigating this.
We’ve gathered the most common questions our clients are asking — and answered them here, clearly and simply.
Why is Making Tax Digital happening?
HMRC has been working toward digitising the tax system for several years. The idea is to:
- Reduce errors in tax reporting
- Simplify the process over time
- Encourage businesses and individuals to keep better records
- Help HMRC spot and deal with problems earlier
MTD began with VAT in 2019. Now it’s expanding to include Income Tax, starting with certain sole traders and landlords in 2026.
Who Will Be Affected?
Does this apply to partnerships?
Not in 2026. Partnerships will join MTD in a future phase, but for now, this only affects individuals.
What if I earn less than £50,000?
You’re not affected yet. From 6 April 2027, MTD will apply to people with income between £30,000 and £50,000. If you’re below that, you may still be brought in later — so it’s worth keeping an eye on developments.
What if I own property jointly with someone else?
HMRC looks at your share of the income. If your portion adds up to over £50,000 (or £30,000 from 2027), MTD will apply to you, even if the total income is split across multiple owners.
What if I have more than one business or rental property?
You’ll need to send separate reports for each business or rental portfolio. If you’re a sole trader and a landlord, each activity requires its own updates and end-of-year summary.
What if I start trading partway through a year?
If your income is expected to cross the threshold, you’ll need to comply with MTD from the date your business or rental activity begins.
What Will I Need to Do?
Under MTD, you’ll send more regular updates to HMRC — using approved software — instead of one big return each year.
Here’s what you’ll need to submit:
Quarterly Updates (4 per year)
Every three months, you’ll send HMRC a summary of your:
- Business or rental income
- Allowable expenses
- Property income and costs (if you’re a landlord)
There’s no tax calculation at this stage — just a record of your totals.
End of Period Statement (EOPS)
At the end of the tax year, you’ll submit an EOPS to:
- Confirm your final income for the year
- Adjust for any tax-specific items (e.g. capital allowances, disallowed expenses)
- Report your real profit or loss
Final Declaration
This replaces your annual Self Assessment. You’ll submit:
- All your income from all sources (wages, dividends, pensions etc.)
- Reliefs and tax allowances
- Your final tax calculation
You’ll still pay your tax the same way — just with more frequent reporting throughout the year.
When Are the Deadlines?
MTD follows the tax year (6 April to 5 April). Your quarterly updates will be due as follows:
Period | Deadline |
6 Apr – 5 Jul | 5 August |
6 Jul – 5 Oct | 5 November |
6 Oct – 5 Jan | 5 February |
6 Jan – 5 Apr | 5 May |
Your End of Period Statement and Final Declaration are both due by 31 January following the tax year.
For the first full MTD year (2026–27), everything will need to be submitted by 31 January 2028.
You’ll still pay your tax by the usual deadlines:
- 31 January – main balance and first payment on account
- 31 July – second payment on account
What Software Will I Need?
Can I still use spreadsheets?
Yes, but only if they’re linked to bridging software that allows direct submission to HMRC.
What software do you recommend?
We’re currently testing MTD-compatible options. We’ll make a final decision on which one we’ll support and provide training for by the end of March 2026.
Will there be training for clients?
Yes — we’ll run MTD training in May 2026 for clients who want to handle their own submissions. We’ll use your April data so you can practise with real numbers.
Can Spotlight Submit My Updates?
Can you file my MTD updates for me?
Yes — but only if we do your bookkeeping or VAT returns. We’re not offering a standalone “submission only” service, as checking someone else’s data can be more time-consuming than doing it ourselves.
Can I authorise someone else to do it for me?
Yes — with the right access, your accountant or bookkeeper can file on your behalf.
What happens if I miss a deadline?
HMRC is introducing a points-based penalty system. One missed report might not lead to a fine, but repeated issues will trigger penalties — so it’s important to stay on track.
Can I opt out of MTD?
Only in very specific cases — like if you genuinely can’t use a computer or the internet. Most people won’t qualify for an exemption.
Practical Tips for MTD Success
Do I need a separate bank account?
Yes — while not legally required, having a separate business bank account is highly recommended. It keeps your records clean and makes reporting far simpler.
What if I use cash accounting?
No problem — MTD supports both cash and accruals basis reporting.
What if I sell a property or close my business?
You’ll still need to submit reports up to that point. We’ll help you wind things down smoothly.
Will this cost me more?
If you file your own reports, you’ll likely need to pay for software.
Will HMRC still send letters?
Most MTD updates will be delivered digitally, either through your software or HMRC’s online account.
What Should I Do Now?
- Understand if MTD applies to you
- Start keeping your records digitally
If you’re using paper records or notebooks — or a box of receipts at year-end — now’s the time to change.
You don’t need to wait until MTD is mandatory. Start getting used to a digital system that works for you.
This might include:
- A spreadsheet (if paired with bridging software later)
- Cloud bookkeeping software like Xero or FreeAgent (This is our recommended approach)
- A mobile app to track income, expenses, and mileage
The earlier you get familiar with digital record-keeping, the easier MTD will feel when it begins.
Not all accounting tools are MTD-ready yet, especially for Income Tax. HMRC keeps a list of approved software — but many providers won’t release their final versions until closer to April 2026.
- Open a separate bank account for your business or rental income
This isn’t just a helpful tip — it’s a best practice under MTD.
When your business or rental income and expenses go through a dedicated bank account, it becomes much easier to track your finances, spot issues, and reduce errors in your submissions.
It also speeds up reconciliation if you’re using software that pulls in your bank transactions automatically.
- Keep track of key dates
MTD introduces new quarterly reporting deadlines, which you’ll need to meet throughout the year.
wall calendar or diary so they don’t sneak up on you.
- 5. Get into the habit of regular bookkeeping
Even if you’re only required to file once a year for now, quarterly submissions will soon be the norm.
Start reviewing your income and expenses monthly (or even weekly). This helps build a rhythm that will make quarterly reporting feel routine, not rushed.
It will also give you better insight into how your business or property is doing financially — and help avoid surprises at tax time.
- 6. Ask questions beforeyou’reunder pressure
If anything about MTD confuses you — like what to report, how to categorise expenses, or how bridging software works — now’s the time to find answers.
You can:
- Read HMRC’s guidance on MTD ITSA
- Watch videos or webinars
- Join forums or online communities
- Speak with a bookkeeper or accountant (even just for one session)
Being proactive now will give you breathing room later.
