MTD for Income Tax (ITSA) – Making Tax Digital for Self-Employed & Landlords
A Major Change to How Income Tax Is Reported in the UK
Making Tax Digital isn’t just about VAT anymore.
The next major phase — MTD for Income Tax Self Assessment (ITSA) — is set to transform how self-employed individuals and landlords report their earnings to HMRC.
Instead of submitting one tax return per year, affected taxpayers will move to a system of digital record keeping and quarterly reporting.
For many people, this raises immediate questions:
- Do I fall under MTD for income tax?
• What are the income thresholds?
• How do quarterly updates work?
• What is an EOPS?
• Do landlords need to comply too?
If you’ve been searching for answers around making tax digital ITSA, this guide explains everything clearly — without technical jargon.
And if you need support, our team handles the full transition from setup to ongoing reporting.
Understanding What MTD for Income Tax Actually Is
MTD for Income Tax is HMRC’s plan to digitise income reporting for individuals who currently file Self Assessment tax returns.
Under the new system, taxpayers must:
- Keep digital income and expense records
• Use HMRC-compatible software
• Submit quarterly income updates
• Complete an End Of Period Statement (EOPS)
• File a Final Declaration confirming total income
The goal is to move from annual reporting to near real-time tax visibility.
HMRC believes this will reduce reporting errors and help taxpayers manage liabilities more proactively.
Who Falls Under MTD for Income Tax
One of the most important questions is whether you’re required to comply.
MTD for Income Tax applies primarily to two groups:
- Self-employed individuals
• Landlords earning rental income
This includes:
- Freelancers
• Consultants
• Contractors
• Tradespeople
• Property investors
• Portfolio landlords
Even individuals with both business and property income must comply if combined earnings exceed thresholds.
Income Thresholds — When MTD Becomes Mandatory
Eligibility is determined by annual gross income — not profit.
If your total self-employed or property income exceeds HMRC’s threshold, MTD reporting becomes mandatory.
This threshold is being phased in — with different entry points depending on income levels and implementation stages.
Preparing early is strongly advised, as transitioning systems takes time.
We help clients assess their income position and determine when MTD ITSA applies to them.
Landlords Under Making Tax Digital
Many landlords are unaware that MTD applies to them — particularly those managing property portfolios alongside other income streams.
MTD landlords UK obligations include:
- Digitally tracking rental income
• Recording property expenses
• Submitting quarterly updates
• Completing annual declarations
Whether you own one property or multiple, digital reporting requirements still apply once income thresholds are exceeded.
Digital Record Keeping for Income Tax
At the heart of income tax digital reporting is record keeping.
You must maintain digital records of:
- Business income
• Allowable expenses
• Property rental income
• Property costs
• Mileage and travel (if applicable)
• Mortgage interest (landlords)
Paper records alone won’t be compliant.
Spreadsheets may be used — but only when linked to MTD-compatible submission tools.
We help clients structure compliant digital bookkeeping systems aligned with HMRC requirements.
Quarterly Updates — A New Reporting Rhythm
One of the biggest shifts under MTD ITSA is the move to quarterly reporting.
Instead of waiting until year end, taxpayers must submit income summaries every three months.
These updates include:
- Total income received
• Expenses incurred
• Estimated profit position
They don’t finalise your tax bill — but they provide HMRC with ongoing visibility into earnings.
This also helps taxpayers track liabilities throughout the year rather than facing surprises at filing time.
End Of Period Statement (EOPS) — Confirming Your Accounts
At the end of the tax year, quarterly updates are consolidated through an End Of Period Statement.
The EOPS finalises your business income figures.
It includes:
- Accounting adjustments
• Allowance claims
• Final profit calculations
This ensures all quarterly estimates are reconciled before final tax calculation.
Final Declaration — The Modern Self Assessment
The Final Declaration replaces the traditional Self Assessment submission.
It confirms:
- Total income across all sources
• Business profits
• Property income
• Other taxable earnings
Once submitted, your final income tax liability is calculated — similar to current Self Assessment outcomes but via digital reporting infrastructure.
Requirements for Making Tax Digital for Income Tax
To comply with MTD for income tax, HMRC requires taxpayers to move away from manual reporting and adopt fully digital processes.
This isn’t just about submitting updates — it’s about how financial records are created, stored, and reported throughout the year.
To remain compliant, you must:
- Keep digital records of all business income
• Record allowable expenses digitally
• Track property income (if applicable)
• Maintain supporting documentation
• Use HMRC-recognised software
• Submit quarterly updates electronically
• Complete an End Of Period Statement
• File a Final Declaration annually
Spreadsheets can still be used — but only when linked through compatible bridging or accounting software that allows digital submissions.
Paper-only bookkeeping will not meet MTD compliance standards.
The Making Tax Digital Income Tax Process
Moving into MTD ITSA follows a structured reporting cycle that repeats annually.
It begins with setting up digital record keeping — ensuring all income and expenses are captured in compliant software.
From there, the reporting process follows a quarterly rhythm.
Each quarter, income and expenses are summarised and submitted to HMRC through digital updates.
These submissions provide HMRC with an ongoing picture of earnings but do not finalise tax liability.
At the end of the tax year, the End Of Period Statement is completed.
This step adjusts quarterly figures for allowances, reliefs, and accounting changes — ensuring income is reported accurately.
Finally, the Final Declaration confirms total taxable income across all sources, replacing the traditional Self Assessment return.
Once submitted, HMRC calculates the final income tax position.
Penalties for Non-Compliance With MTD ITSA
Although MTD for Income Tax is still being phased in, penalties will apply once compliance becomes mandatory.
Failure to follow digital reporting requirements may result in:
- Late quarterly submission penalties
• Points-based filing fines
• Interest on unpaid tax
• Compliance warnings
• Increased HMRC monitoring
Businesses and landlords who continue using manual systems after being mandated may also face reporting rejections.
Preparing early avoids last-minute system pressure and potential financial consequences.
How We Help With MTD for Income Tax
Transitioning into digital income reporting can feel overwhelming — especially for individuals used to annual Self Assessment filings.
Our role is to make the process simple, structured, and fully compliant.
We support clients through every stage, including:
- MTD eligibility assessments
• Income threshold reviews
• Software selection and setup
• Digital bookkeeping implementation
• Quarterly update submissions
• EOPS preparation
• Final Declaration filing
• HMRC liaison and compliance support
Whether you’re self-employed, a landlord, or both — we tailor reporting systems around your income streams.
Support for Self-Employed Professionals
Self-employed clients often require guidance beyond compliance.
We help structure:
- Expense tracking systems
• Profit visibility reporting
• Tax liability forecasting
• Allowable deduction optimisation
Digital reporting becomes not just a compliance tool — but a financial planning advantage.
Support for Landlords
Property income reporting under MTD requires structured rental bookkeeping.
We assist landlords with:
- Rental income tracking
• Expense categorisation
• Mortgage interest recording
• Property portfolio reporting
• Quarterly submissions
Whether you own one property or a portfolio, we ensure reporting remains accurate and compliant.
Frequently Asked Questions — MTD for Income Tax
Who must comply with MTD for income tax?
Self-employed individuals and landlords above income thresholds.
What is the income threshold?
It’s based on gross income from business and/or property sources.
Do landlords need to follow MTD?
Yes — if rental income exceeds the threshold.
How often are reports submitted?
Quarterly updates, plus annual statements.
What is an End Of Period Statement?
It finalises income figures after quarterly submissions.
What is the Final Declaration?
It confirms total income across all sources, replacing Self Assessment.
Can spreadsheets still be used?
Yes — if digitally linked to submission software.
Are there penalties for non-compliance?
Yes — including fines and interest.
Can you manage submissions for me?
Yes — we provide full reporting support.
Ready to Transition Into MTD for Income Tax?
If you’re self-employed or earn property income, now is the time to prepare for Making Tax Digital.
Early preparation avoids rushed system setup, missed submissions, and compliance stress once mandates apply.
Audit Consulting Group will:
- Confirm whether MTD applies to you
• Set up compliant software
• Digitise your income records
• Manage quarterly reporting
• Complete annual declarations
You stay focused on earning — we handle the reporting.
