MTD Readiness Checklist Trending

Making Tax Digital for Income Tax Self Assessment (MTD ITSA) requires self-employed individuals and landlords with qualifying income above £50,000 to maintain digital records and submit quarterly updates to HMRC using MTD-compatible software from April 2026. Those with income between £30,000 and £50,000 will follow from April 2027. Quarterly updates must be submitted within one month of each quarter end, with a final End of Period Statement and Final Declaration replacing the traditional Self Assessment return.

Readiness is assessed across multiple criteria: whether you currently use MTD-compatible accounting software (spreadsheets linked via bridging software also qualify), whether your income and expense records are kept digitally from the point of transaction, whether you can generate and submit quarterly summaries to HMRC through the API, and whether your record-keeping already categorises income and expenses to the level HMRC requires.

Additional readiness factors include whether your tax agent is prepared for MTD, whether you have tested the submission process using HMRC's sandbox environment, and whether your business processes can meet the quarterly filing deadlines (5 July, 5 October, 5 January, 5 April with one-month submission windows). Penalties under the new points-based regime accumulate for late submissions: each late filing adds a point, and at the threshold (4 points for quarterly obligations), a £200 penalty is triggered for that and every subsequent late submission.

What is Making Tax Digital (MTD)? HMRC's programme to digitise tax. Phase 1 (VAT, April 2019): mandatory for VAT-registered businesses above £85k threshold. Phase 2 (VAT, April 2022): all VAT-registered businesses. Phase 3 (Income Tax Self Assessment): originally 2024, delayed to April 2026 (sole traders/landlords with turnover £50k+); April 2027 (£30k+); £20k+ delayed indefinitely. Requires: keep records in MTD-compatible software; submit quarterly updates; final declaration annually.

MTD ITSA — 2026 critical dates. April 2026: mandatory for sole traders + landlords with combined turnover £50,000+/year. Submit quarterly updates (5 weeks after each quarter-end): 5 August (Apr-Jun), 5 November (Jul-Sep), 5 February (Oct-Dec), 5 May (Jan-Mar). Final declaration: 31 January following tax year. Income Tax Year 2026/27 first MTD year. Penalties: similar regime to MTD VAT — £200 fixed plus surcharges for repeated lateness.

MTD-compatible software 2026. Major UK options: FreeAgent (free with NatWest/RBS business banking), Xero (£14/month basic), QuickBooks (£10/month basic), Sage (£14/month), FreshBooks. Spreadsheets allowed if combined with 'bridging software' (free options: Bridge Software, 100PcVATFreeBridge). HMRC publishes approved software list. Choose: cloud-based for automatic backups; integration with bank feeds; landlord-specific features if rentals involved.

What records must you keep? Digital records of: income and expenses (date, amount, description); VAT input/output transactions (if VAT-registered); links between source data and software submission ('digital links' rule — no manual re-typing). Receipts: scan into software OR keep paper copies for 5 years. HMRC checks: random selection, plus risk-based. Significant penalties for non-compliance once mandatory.

Preparing for MTD ITSA April 2026. Step 1: estimate 2024/25 turnover. If £50k+ from sole trader/property: MTD applies. Step 2: choose MTD-compatible software (12+ months before deadline ideal). Step 3: digitise records — scan receipts, set up bank feeds, categorise income/expenses. Step 4: file 2024/25 Self Assessment as normal (final pre-MTD year). Step 5: First MTD quarterly update due 5 August 2026 (covering April-June 2026 quarter). Use accountant for first year — typical fee £600-£1,500.