Making Tax Digital,actually handled.

MTD for Income Tax (officially MTD ITSA) is HMRC's overhaul of the Self Assessment system for sole traders and landlords. Live since 6 April 2026, it requires affected taxpayers to (1) keep digital records of business income and expenses using MTD-compatible software, (2) send quarterly summary updates to HMRC (4 times a year), and (3) submit an annual Final Declaration replacing the traditional Self Assessment return for in-scope income.

From 6 April 2026, MTD ITSA applies to UK sole traders and landlords whose qualifying gross income from self-employment and/or property combined exceeded £50,000 in the 2024/25 tax year. The threshold drops to £30,000 from April 2027 and £20,000 from April 2028. Limited companies, general partnerships and people with only PAYE/dividend/interest income are not in scope.

Gross income — before expenses — from self-employment and UK/foreign property combined. PAYE salary, dividends, savings interest and capital gains do NOT count toward the threshold. Example: if you earn £40,000 from self-employment and £15,000 from rental property, your qualifying income is £55,000 — you're in scope from April 2026, even though after expenses your taxable profit might be £30,000.

For the standard tax year (6 April – 5 April) the quarterly update deadlines are: Q1 (Apr-Jul) by 7 August, Q2 (Jul-Oct) by 7 November, Q3 (Oct-Jan) by 7 February, Q4 (Jan-Apr) by 7 May. The annual Final Declaration is due 31 January following the tax year — the same deadline as the old Self Assessment. You can opt for calendar-quarter periods (ending 31 March) if your accounting period matches.

HMRC operates a points-based penalty system. Each late submission earns a point; reach four points and you trigger a £200 fixed penalty. HMRC confirmed a soft-landing period for the 2026/27 tax year (no penalty points for late quarterly updates) to help taxpayers adapt. From 2027/28 onwards, penalty points apply normally. We file on your behalf ahead of deadlines, so you won't accumulate points.

No — quarterly updates are reporting only, not tax payments. You still pay your tax in the existing pattern: 31 January (balancing payment plus first payment on account), 31 July (second payment on account). The quarterly updates just give HMRC ongoing visibility into your income and expenses.

EOPS was originally part of HMRC's MTD design, but it has been removed. From April 2026 onwards, you only file four quarterly updates plus a single Final Declaration. There is no separate EOPS submission. (Older guidance still mentions EOPS — ignore it.)

The Final Declaration is the annual confirmation of your total income and tax liability, due by 31 January following the tax year-end. It replaces the traditional Self Assessment (SA100) return for income that's in MTD ITSA scope. It pulls in your four quarterly updates plus any other personal income (PAYE, dividends, interest, capital gains, etc.) and finalises your total tax position.

Only via 'bridging software' that connects your spreadsheet to HMRC's MTD systems. In practice, most clients find it simpler and cheaper to move to FreeAgent or Xero (both included in our monthly fee). Paper records are no longer permitted for in-scope taxpayers.

HMRC maintains a list of MTD-compatible software at gov.uk. The most common options are FreeAgent (free with NatWest, RBS or Mettle business banking), Xero (£15-£59/month depending on plan), QuickBooks (£10-£60/month), and Sage Sole Trader (free tier available). With our service, FreeAgent or Xero is included — no separate cost.

Most people in your position should wait — but get MTD-ready bookkeeping in place anyway. Voluntary sign-up brings forward your compliance obligations but doesn't bring any reward. However, switching to MTD-compatible software now means you won't face a chaotic transition when the threshold drops to £30,000 (April 2027) or £20,000 (April 2028). Most self-employed people will be in scope by 2028.

For in-scope income (self-employment + property), the Final Declaration replaces the SA100 Self Assessment. Other income (employment, dividends, capital gains, etc.) is still reported within the Final Declaration framework. In practice, you stop filing the traditional SA100 from the first tax year you're in MTD scope and start filing quarterly updates + Final Declaration instead.

Yes — Ailo Accounting is regulated by the Institute of Chartered Accountants in England and Wales (ICAEW). All MTD filings are reviewed and supervised by a chartered accountant. We carry professional indemnity insurance and are AML-supervised by ICAEW.