Deadlines, Software, Penalties and What to Do Before April 2026
HMRC is replacing annual Self Assessment with a year-round digital system. Under Making Tax Digital for Income Tax (MTD for ITSA), you submit income and expense summaries four times a year through approved software. The first mandatory deadline for high-income earners is 6 April 2026.
This guide covers who falls under MTD for ITSA, when the rules apply, how quarterly reporting works in practice, which software HMRC accepts, and what penalties you face if you miss a deadline.
What Is Making Tax Digital?
Making Tax Digital is HMRC’s programme to put UK tax records and submissions entirely online. It launched for VAT in April 2019. Businesses with taxable turnover above the VAT registration threshold at that time, £85,000, had to keep digital records and file returns through compatible software. Since April 2022, the requirement covers every VAT-registered business, whatever its turnover. Exemptions exist but require a formal application.
MTD for Income Tax Self Assessment is the next phase. It applies to self-employed individuals and landlords based on their gross qualifying income. Those earning above £50,000 in the 2024/25 tax year must comply from 6 April 2026. The threshold falls to £30,000 from 6 April 2027, assessed against 2025/26 income. The Government has set out legislation for a further reduction to £20,000 in later years.
Under MTD for ITSA, you file quarterly income summaries for each source of income, complete an End of Period Statement to confirm annual figures, then submit a Final Declaration to settle your tax position for the year.
Who Falls Under MTD for ITSA, and From When?
The rules apply in stages:
• VAT-registered businesses are already in MTD for VAT, enrolled since 2019 or 2022.
• Sole traders and landlords with qualifying income above £50,000 must comply from 6 April 2026.
• Sole traders and landlords with qualifying income between £30,000 and £50,000 must comply from 6 April 2027.
• Partnerships are not currently included in mandatory MTD for ITSA. HMRC has not set a date for partnerships.
What counts as qualifying income?
Qualifying income is total gross receipts before you deduct any business expenses. It is not your taxable profit. A graphic designer who invoices clients for £52,000 and spends £12,000 on equipment and software has qualifying income of £52,000. That puts them in scope for April 2026. HMRC uses your 2024/25 tax year figures to assess eligibility for the first wave. Check your last filed return now, or estimate your current year gross income, to confirm your position.
How Quarterly Reporting Works in Practice
Each quarter, you submit a summary of gross income and allowable expenses to HMRC through your chosen software. These updates are working summaries, not final tax calculations. If a figure is wrong, you adjust it in the next quarterly update or during the End of Period Statement. HMRC expects reasonable accuracy, and the system is built to accept corrections.
Filing deadlines for the 2026/27 tax year:
• 6 April to 5 July 2026, due by 7 August 2026
• 6 July to 5 October 2026, due by 7 November 2026
• 6 October 2026 to 5 January 2027, due by 7 February 2027
• 6 January to 5 April 2027, due by 7 May 2027
After the fourth quarter, you complete an End of Period Statement per income source to confirm your annual totals and claim any allowances. A Final Declaration then replaces the SA100 Self Assessment return for taxpayers within MTD for ITSA.
In day-to-day terms, this means recording income and expenses as they occur. Waiting until quarter-end to reconstruct weeks of transactions increases the risk of errors and missed items. Taxpayers already using accounting software will find the adjustment minor. Those working from paper records or memory will need to change their habits.
Choosing HMRC-Approved Software
HMRC requires you to file through software that connects to its systems directly. A standard spreadsheet application does not qualify on its own. If you want to keep working in spreadsheets, bridging software can link your data to HMRC via a compliant digital connection. Most tax advisers treat bridging software as a short-term option rather than a long-term solution.
Platforms commonly used for MTD for ITSA:
• QuickBooks Online, widely used by freelancers and sole traders.
• Xero, suited to taxpayers with multiple income streams and strong bank integration needs.
• FreeAgent, a common choice for contractors and those whose business bank account includes it.
• Sage Accounting, an established option with full MTD and VAT support.
• Coconut and Kashflow, serving specific trade sectors.
Before subscribing, confirm the product appears on HMRC’s official MTD software list on GOV.UK. The list is updated as products gain or lose approval. Pricing ranges from free entry-level tiers to around £50 per month for full-feature plans. Prioritise software that connects to your bank account, handles your specific income type, and posts transactions automatically.
Penalties: Late Submission and Late Payment
Late submission
HMRC replaced the old fixed-penalty model with a points-based system. Miss a filing deadline and you receive one penalty point. Quarterly filers hit the penalty threshold at 4 accumulated points. At that point HMRC charges £200. Each subsequent missed deadline adds a further £200. Points drop off over time, but only after you file on time consistently for a set period. That period is determined by how often you are required to submit.
Late payment of Income Tax
Submission penalties and payment penalties are separate. For Income Tax, unpaid tax attracts a 5% surcharge after 30 days. A further 5% is charged at 6 months and another 5% at 12 months. Interest runs on the outstanding amount from the day the payment was due. On a tax bill of several thousand pounds, these charges add up fast.
VAT late payment follows a separate scheme introduced in January 2023. The percentages and structure differ from Income Tax. If you are VAT-registered, read the current VAT late payment guidance on GOV.UK separately.
Keeping Records Ready for an HMRC Enquiry
MTD gives HMRC access to more of your financial data in real time. An enquiry does not become more likely just because you are in MTD, but when one opens, the strength of your digital records determines the outcome. Weak or incomplete records extend the process and increase exposure.
Practical steps to take now:
• Enter every transaction into your software as it happens, not at the end of the quarter.
• Retain supporting documents, invoices, receipts, and bank statements, for at least 5 years after the 31 January filing deadline for the relevant tax year.
• Open a dedicated business bank account if you do not have one. HMRC scrutinises mixed accounts closely.
• Reconcile your software against your bank statement each month. Errors caught early take minutes to fix; errors found at year-end take hours.
• Record the business purpose of any expense HMRC might question, home office use, vehicle mileage, equipment, and subscriptions.
• If HMRC writes to you, respond quickly. A tax specialist can reply on your behalf and manage the process from start to finish.
Five Errors That Catch People Out During the Transition
These problems come up repeatedly among taxpayers moving to MTD:
• Leaving sign-up too late. Your existing Self Assessment registration does not transfer to MTD for ITSA automatically. You need to sign up separately. HMRC’s private beta accepts applications now, subject to eligibility. Miss the window and you risk an unregistered first deadline.
• Relying on software that is not on the approved list. Plenty of accounting tools exist that do not meet HMRC’s technical requirements. Check GOV.UK before you commit.
• Filing quarterly updates from memory at the last minute. Quarterly updates work when you record transactions throughout the period. Reconstructing three months of data in one session produces inaccurate figures.
• Skipping the exemption application. Digital exclusion exemptions cover disability, age, lack of broadband access, religious grounds, and certain remote locations. None of these apply automatically. You must contact HMRC and apply formally.
• Treating multiple income sources as one. Self-employment income and rental income require separate quarterly updates under MTD. Merging them in your records creates mismatches at filing time.
Work with a Specialist on Your MTD Transition
MTD for ITSA changes your filing obligations, your software requirements, and the way you keep records throughout the year. Setting things up correctly from the start saves time and avoids penalties. Correcting a poor setup after your first missed deadline costs considerably more.
If you want qualified support from accountants who work with MTD every day, book a consultation with Audit Consulting Group. Their tax team covers the full MTD process for UK sole traders, landlords, and small businesses.
Services include:
• Eligibility assessment and MTD sign-up, completed correctly before your first quarterly deadline.
• Software selection matched to your income sources and business type.
• Quarterly update preparation and submission.
• End of Period Statement and Final Declaration filing.
• Representation if HMRC opens an enquiry into your records.
View our Making Tax Digital (MTD ITSA) tax services at Audit Consulting Group.
What to Do Before April 2026
MTD for Income Tax is a permanent change to UK tax administration. Annual Self Assessment is being replaced. There are no extensions for the April 2026 start date and HMRC has confirmed the timetable.
Taxpayers who act early select the right software, record transactions consistently, and separate business from personal finances. Taxpayers who wait accumulate rushed decisions, incomplete records, and penalty points that build before they notice.
Check your 2024/25 gross income against the £50,000 threshold now. If you are in scope, register for MTD for ITSA, select your software, and start recording transactions digitally. If you are close to the threshold, monitor your 2025/26 income against the £30,000 limit. Speak to a qualified tax adviser if any part of the process is unclear.
Frequently Asked Questions
I already file Self Assessment. Does that mean I am signed up for MTD?
No. MTD for ITSA is a separate registration. Your Self Assessment account does not transfer automatically. You apply via GOV.UK. HMRC’s private beta is open now, with eligibility requirements. Sign up before your mandation date.
Can my accountant handle MTD filings on my behalf?
Yes. You authorise an agent to submit your quarterly updates, End of Period Statement, and Final Declaration. Your existing Self Assessment agent authorisation is recognised, though a separate MTD enrolment step is required.
What happens if a quarterly update contains an error?
Correct it in the next quarterly update or during the End of Period Statement. HMRC does not penalise corrections made in good faith through the normal process.
I do not use the internet. Am I exempt?
You need to apply for a digital exclusion exemption. HMRC considers applications based on lack of internet access, disability, age, religious grounds, or remote location. Exemptions are not granted automatically.
My gross income for 2024/25 is above £50,000. When do I need to be ready?
Your mandation date is 6 April 2026. Your first quarterly update covers 6 April to 5 July 2026 and is due by 7 August 2026. Sign up and set up your software before that date.
