Making Tax Digital for Self-Assessment: What You Need to Know
Making Tax Digital for Income Tax Self Assessment changes how self‑employed individuals and landlords keep records and report their income and expenses to HMRC. Instead of completing everything in one annual tax return, taxpayers must keep digital records and use HMRC‑compatible software to send regular updates to HMRC during the year.
Making Tax Digital requires taxpayers to keep digital records and use compatible software to submit tax returns. The implementation of MTD for Income Tax Self-Assessment (ITSA) started in April 2026. Here are the key dates:
From 6 April 2026: Individuals with qualifying income over £50,000 from self-employment or property must use MTD for ITSA.
From 6 April 2027: The threshold lowers to £30,000.
From 6 April 2028: The threshold lowers further to £20,000.
What Does Making Tax Digital Mean for Landlords?
If you own rental property in the UK and your rental income exceeds the qualifying thresholds (see above), you will need to comply with MTD for ITSA. This means:
Digital Record-Keeping: You will need to maintain digital records of your rental income and expenses. This can be done using MTD-compatible software, which will help you keep accurate and up-to-date records.
Quarterly Updates: Instead of submitting an annual tax return, you will need to send quarterly updates to HM Revenue and Customs (HMRC). This ensures that your tax information is always current.
End-of-Period Statement: At the end of the tax year, you will need to submit a final declaration to confirm your income and expenses for the year. This replaces the traditional self-assessment tax return.
Benefits of MTD
While the transition to MTD may seem daunting, there are several benefits:
Improved Accuracy: Digital record-keeping reduces the risk of errors and ensures that your tax information is accurate.
Better Financial Management: Regular updates help you keep track of your income and expenses throughout the year, making it easier to manage your finances.
Simplified Tax Process: Using MTD-compatible software can streamline the tax process, saving you time and effort.
Early Visibility of Your Tax Position: Because you are updating HMRC quarterly, you and your accountant can see your likely tax liability months before the payment is due, making cash flow planning easier.
Preparing for MTD
The best time to start preparing for making tax digital for self-assessment is before HMRC contacts you. Here is what we recommend:
Check whether your income is likely to exceed the relevant threshold in the current or next tax year.
Choose MTD-compatible software. We typically use FreeAgent or Xero for our clients, and we can help you pick the right one.
Start keeping digital records now, even if your mandate date is still a year away. Building the habit early makes the transition much smoother.
Sign up for MTD for Income Tax once HMRC contacts you, or ask us to handle the sign-up on your behalf as your agent.
How Xero and FreeAgent Can Help
If you are a client of Anlo, you most likely already use Xero or FreeAgent. Both are fully MTD-compatible and integrate directly with HMRC's systems:
Xero: An all-in-one platform for invoicing, VAT, bank reconciliation, and digital tax submissions. Xero's MTD-compatible software lets you maintain digital records and file directly to HMRC, with forecasting tools and automated bank feeds built in.
FreeAgent: Purpose-built for self-employed individuals and small businesses. FreeAgent lets you track income and expenses, manage your tax timeline, and submit MTD VAT returns and self-assessment directly to HMRC, including from a mobile app.
By using Xero or FreeAgent through Anlo, you get the software set up correctly from day one. We configure it to match how your business works, not how the manual says it should work.
Making Tax Digital for Self-Employed Individuals
If you are self-employed, making tax digital for self-employed means you will need to maintain digital records of your business income and expenses and send quarterly updates to HMRC through MTD-compatible software.
The income thresholds work on your gross income (before expenses). If your gross income from self-employment is over £50,000, this applies to you from 6 April 2026. If it is over £30,000, your start date is 6 April 2027.
We work with self-employed clients across Scotland and the UK, from sole traders and freelancers to contractors and property owners. We can confirm your MTD position, set up the right software, and handle your quarterly submissions so you can focus on your work.
MTD for VAT
MTD for VAT is already in effect for all VAT-registered businesses in the UK. If you are VAT-registered, you are already required to keep digital VAT records and submit VAT returns through HMRC-approved MTD-compatible software.
If you are not yet set up on MTD-compatible software for VAT, or you are unsure whether your current setup is fully compliant, get in touch, and we will check your position and correct anything that needs fixing.
Making Tax Digital Deadlines
Here is a summary of the current Making Tax Digital deadlines:
6 April 2026: MTD for Income Tax applies to sole traders and landlords with gross income over £50,000
6 April 2027: Extends to those with gross income over £30,000
6 April 2028: Extends to those with gross income over £20,000
7 August 2026: First quarterly update deadline for those mandated from April 2026
7 November 2026, 7 February 2027, 7 May 2027: Remaining quarterly deadlines in the first year
MTD for VAT: Already in effect for all VAT-registered businesses
If you are unsure which deadline applies to you, contact us, and we will confirm your exact position based on your income sources.
Making Tax Digital for Small Businesses
Making tax digital for small businesses covers two separate obligations, depending on your business structure and income:
If you are VAT-registered, MTD for VAT already applies to you. You must keep digital records and submit VAT returns through MTD-compatible software.
If you are a sole trader or run a small business with qualifying income over the MTD for Income Tax thresholds, you will also need to comply with MTD for ITSA from your mandated date.
For small businesses approaching the income thresholds, now is the right time to review your software setup and record-keeping processes. We can help you prepare before HMRC contacts you, which is always easier than catching up after the fact.
FAQs About Making Tax Digital
When Does Making Tax Digital for Self-Assessment Start?
MTD for Income Tax Self-Assessment starts from 6 April 2026 for sole traders and landlords with gross income over £50,000. It extends to those with income over £30,000 from 6 April 2027, and to those with income over £20,000 from 6 April 2028. If you have received a letter from HMRC about MTD, contact us, and we will confirm exactly what applies to you and when.
Does Making Tax Digital Replace Self-Assessment?
No. Making tax digital for self-assessment does not replace your self-assessment tax return entirely. Under MTD for ITSA, you will send quarterly updates to HMRC throughout the year, but you will still file a final declaration at the end of the tax year to confirm your total income and expenses. The quarterly updates are summaries, not full tax returns, and they do not trigger immediate tax payments.
What Software Do I Need for Making Tax Digital?
You need HMRC-recognised MTD-compatible software. At Anlo, we use FreeAgent or Xero for the majority of our clients, as both are fully MTD-ready and straightforward to use. We set up the software, configure it to your business, and handle your submissions. If you already use accounting software, we can check whether it is MTD-compliant and advise on any changes needed.
Can I Still Voluntarily Use MTD if My Income is Below the Threshold?
Yes. Individuals with a qualifying income below £50,000 can opt in to MTD for self-assessment voluntarily from April 2026, even though it is not mandatory for them until their threshold date. Opting in early can be a sensible move, as it gives you time to get used to the software and the quarterly process before it becomes compulsory.
Will There Be Penalties for Missing MTD Quarterly Deadlines?
Yes. HMRC operates a points-based penalty system for late quarterly updates under MTD. Each missed deadline earns a penalty point, and once you reach the threshold, a financial penalty is applied. The system is designed to be proportionate, so occasional lateness is treated differently from persistent non-compliance. We manage our clients' quarterly submissions to ensure nothing is missed.
Do I Still Need to File a Self-Assessment Tax Return Under MTD?
Yes. Even with the quarterly updates, you will still need to file a final declaration at the end of the tax year. This confirms your total income and expenses and ensures all tax obligations are met. The final declaration replaces the traditional self-assessment return in the MTD system, but it fulfils the same purpose.
Not Sure if Making Tax Digital for Self-Assessment Applies to You?
We help sole traders, landlords, and small businesses across Scotland and the UK understand exactly where they stand with MTD. Whether you have received a letter from HMRC, you are approaching one of the income thresholds, or you want to get set up on the right software before your start date, we can help.
Here is what Anlo can do for you:
Confirm whether making tax digital for self-assessment applies to you and from which date, based on your income sources and HMRC thresholds.
Set you up on MTD-compatible software (FreeAgent or Xero) and walk you through a simple routine for your digital records.
Handle your quarterly submissions on your behalf, or support you to do them confidently, and keep you on track throughout the year.
Review any HMRC correspondence about MTD and confirm what you need to do and by when.
Book a free consultation with Annja today. We will go through your situation, confirm your MTD position, and put a plan in place so you are fully covered before your start date.