This article answers the most common questions about Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) — both from a client perspective and from a practice perspective. For detailed guidance on specific topics, see the related articles.

Q: What is MTD for Income Tax?

A: MTD for Income Tax Self Assessment (MTD for ITSA) is HMRC's programme requiring self-employed individuals and landlords above the qualifying income threshold to keep digital records and submit quarterly updates to HMRC, replacing the annual Self Assessment return for their trading and property income.

Q: Is MTD for Income Tax the same as MTD for VAT?

A: No. MTD for VAT and MTD for ITSA are two separate schemes. MTD for VAT applies to VAT-registered businesses and has been in operation since 2019. MTD for ITSA applies to self-employed individuals and landlords and is being phased in from April 2026.

Q: Does MTD for ITSA replace Self Assessment entirely?

A: Not entirely. Quarterly updates replace the annual return for trading and property income, but clients still need to submit a Final Declaration at the year end covering all income sources including employment, dividends, and savings.

Q: When does MTD for ITSA become mandatory?

A: Clients with qualifying income of £50,000 or more became mandated from 6 April 2026. Those with income of £30,000 or more will be mandated from 6 April 2027. A further phase for £20,000 or more is proposed for April 2028.

Q: What counts as qualifying income?

A: Qualifying income is the combined gross income from self-employment (sole trader), UK property, and foreign property. Employment income, dividends, savings interest, and pensions do not count.

Q: Is qualifying income based on gross income or profit?

A: Gross income before expenses. A client with £55,000 turnover and £40,000 expenses has £55,000 qualifying income for MTD threshold purposes, even though their profit is only £15,000.

Q: My client has both self-employment and rental income — how is the threshold calculated?

A: The two sources are combined. A client with £25,000 self-employment income and £10,000 rental income has £35,000 qualifying income — above the April 2027 threshold.

Q: What does a quarterly update contain?

A: A quarterly update is a summary of income and expenses for that quarter. It does not calculate or collect tax — it is a digital report to HMRC of the business activity for the period.

Q: When are quarterly updates due?

A: There are four updates per year. Each is due one month after the end of the quarter: 5 August (Q1), 5 November (Q2), 5 February (Q3), and 5 May (Q4).

Q: What happens if a quarterly update is missed?

A: HMRC operates a points-based penalty system for late MTD submissions. Penalty points accumulate and trigger a financial penalty once a threshold is reached. Encourage clients to submit on time to avoid penalties.

Q: Can quarterly updates be submitted early?

A: Yes. Quarterly updates can be submitted at any point after the quarter end — there is no minimum waiting period.

Q: Does my client need to use specific software for MTD?

A: Clients must use MTD-compatible software. This includes accounting software such as Xero, QuickBooks, FreeAgent, and Sage, as well as spreadsheets used with HMRC-approved bridging software.

Q: Can clients use a spreadsheet?

A: Yes, provided they use HMRC-approved bridging software to digitally link the spreadsheet data to HMRC. A standalone spreadsheet without bridging software does not meet the digital links requirement.

Q: What are digital links?

A: Digital links mean that data must flow digitally from the source records through to the submission to HMRC without manual re-keying. Copy and paste between systems breaks the digital link.

Q: Does BrightTax support MTD for ITSA?

A: Yes. BrightTax supports MTD for ITSA including quarterly updates, End of Period Statements, and Final Declarations. The MTD Qualifying Income Report helps you identify and manage your affected clients.

Q: How do I identify which of my clients are affected in BrightTax?

A: Run the MTD Qualifying Income Report from the Reports menu. It shows each client's qualifying income, mandation date, and any exemption reason.

Q: Does using BrightTax for quarterly updates satisfy the digital records requirement?

A: BrightTax handles the submission to HMRC. Clients must also maintain digital records in MTD-compatible software throughout the year. The records themselves must be kept digitally — not just the submission.