MTD ITSA Readiness Calculator — Making Tax Digital 2026/27

Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is HMRC's programme to replace the traditional annual Self Assessment tax return with quarterly digital submissions for self-employed individuals and landlords. Instead of filing one annual return by 31 January, you will be required to submit a quarterly update of your income and expenses through HMRC-approved software for each income source, followed by a final End of Period Statement and an annual Final Declaration. MTD ITSA affects anyone who is self-employed or receives rental income from UK property. It does not apply to employees whose only income is through PAYE, or to those whose qualifying income falls below the relevant threshold for their mandation phase.

Qualifying income for MTD ITSA purposes means the gross income from self-employment and UK property combined — before deducting any business expenses. It is important to understand that the threshold is based on gross turnover, not profit. So a sole trader with £55,000 of income and £30,000 of expenses, leaving a profit of £25,000, would still be caught by the Phase 1 threshold because their gross qualifying income exceeds £50,000. If you have multiple self-employment businesses or properties, the income from all of them is combined for the threshold test. Income from employment (PAYE), savings, dividends, and pension income does not count as qualifying income for MTD ITSA threshold purposes.

There are four quarterly submission deadlines each tax year, with each quarter aligning to the tax year which runs from 6 April. Quarter 1 covers 6 April to 5 July, due by 5 August. Quarter 2 covers 6 July to 5 October, due by 5 November. Quarter 3 covers 6 October to 5 January, due by 5 February. Quarter 4, which also includes the End of Period Statement, covers 6 January to 5 April and the final declaration is due by 31 January the following year. Each quarterly update contains a summary of income and expenses for that period — it is not a full tax calculation but a digital record of your trading activity. The final declaration, due 31 January, is where you confirm all information is correct and HMRC calculates your final tax liability for the year.

You must use HMRC-recognised MTD compatible software to submit your quarterly updates under MTD ITSA. The software must be capable of keeping your records digitally and submitting updates directly to HMRC's systems via their API. HMRC maintains a list of recognised software on their website. Popular options include accounting packages such as QuickBooks, Xero, FreeAgent, and Sage, as well as simpler apps designed specifically for sole traders and landlords. Spreadsheets can be used for record-keeping but must be connected to HMRC via approved bridging software in order to make submissions. Free HMRC-approved apps will be available for the simplest cases. It is advisable to choose your software well in advance of your mandation date so you can familiarise yourself with it and ensure your records are in order from the start of the relevant tax year.

MTD ITSA uses a points-based penalty system for late or missing submissions, rather than an immediate financial fine. Each missed quarterly deadline earns you one penalty point. When your points total reaches the threshold — which is four points for quarterly submissions — a £200 financial penalty is charged, and another £200 is added for each further late submission while you remain above the threshold. Points expire after 24 months of full compliance, meaning all submissions made on time for two consecutive years. The key message is that one or two late submissions may not trigger an immediate financial penalty under the points system, but consistently late filing will result in escalating fines. Separate late payment penalties apply if the tax itself is paid late, and these are based on a percentage of the outstanding amount rather than a points system.