Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is the specific branch of MTD that applies to self-employed individuals and landlords. While Making Tax Digital is the broader programme, ITSA is the part that replaces the traditional annual Self Assessment return with digital record keeping and quarterly reporting.
This guide explains the technical requirements of MTD for ITSA: exactly who is mandated, how income thresholds work, the digital records and digital links requirements, and the quarterly submission process.
Who Must Comply with MTD for ITSA?
MTD for ITSA applies to UK individuals who receive income from:
- Self-employment — sole traders, freelancers, contractors
- Property — landlords receiving rental income
The mandate is based on combined gross income from these two sources. Gross means total turnover before deducting any expenses. The threshold is assessed using the most recent tax return filed before the start of the relevant tax year.
How the Threshold Works
For the 2026/27 tax year (Phase 1), HMRC looks at your 2024/25 Self Assessment return (filing deadline 31 January 2026). If your combined self-employment and property gross income on that return exceeds £50,000, you are mandated into MTD from 6 April 2026.
Example: A freelance designer with £42,000 self-employment turnover who also earns £12,000 in rental income has combined gross income of £54,000 — above the £50,000 threshold, so Phase 1 applies.
What Digital Records Must You Keep?
For each business transaction, you must digitally record:
- The date of the transaction
- The amount
- The category of income or expense
For each sale or income item, you must also record the customer name (for individual transactions over £1,000). For expenses, the supplier name should be recorded.
You are not required to scan receipts digitally for MTD purposes — but HMRC still requires you to keep supporting documentation under general record keeping rules. Since you need receipts anyway, scanning them digitally with an AI receipt scanner creates both the digital record and the supporting documentation in one step.
The Digital Links Requirement
Once data enters your digital records, any subsequent transfer must be digital. This means:
- No manually typing figures from one system into another
- No copy-pasting between spreadsheets and accounting software
- API connections, CSV imports, or automated syncs are acceptable
- Formulas within a single spreadsheet are acceptable
If you use SparkReceipt to capture receipts and then sync data to QuickBooks, that automated connection satisfies the digital links requirement. Manual re-keying of the same data into QuickBooks would not.
Quarterly Updates: What You Submit
Each quarterly update is a cumulative year-to-date summary of your income and expenses, broken down by category. You are not submitting individual invoices or receipts — just totals.
For each income source (each self-employment business or property business), you submit separate updates. If you have one freelance business and one rental property, you submit two sets of quarterly updates.
Can You Correct Earlier Quarters?
Yes. Because updates are cumulative, any receipts or expenses missed in Q1 are automatically captured when included in Q2’s year-to-date figures. You do not need to formally amend a previous quarterly update.
End of Period Statement (EOPS)
After submitting Q4, you file an End of Period Statement to finalise your business income and expenses for the year. This is where you make any final adjustments, apply capital allowances, and confirm the figures are complete.
Final Declaration
The Final Declaration replaces the current Self Assessment return. It brings together all your income sources — self-employment, property, employment, dividends, savings, capital gains — and calculates your total tax liability. The deadline is 31 January following the end of the tax year (same as current Self Assessment).
Partnerships and Joint Property
General partnerships are included in MTD for ITSA from April 2026. Each partner’s share of partnership income counts towards their individual threshold. Limited liability partnerships (LLPs) have a later implementation date — check HMRC guidance for the most current timeline.
For jointly owned property, each owner reports their share of income through their own MTD submissions.
Exemptions
You can apply for exemption from MTD on grounds of digital exclusion: age, disability, remoteness (no reliable internet), or religious objection to using electronic communications. Applications are assessed individually by HMRC. An existing exemption for MTD for VAT does not automatically carry over — you must apply separately.
Preparing Your Records
The foundation of MTD compliance is organised, categorised digital records. SparkReceipt helps by:
- Scanning receipts and extracting transaction details in seconds
- Automatically capturing email receipts from digital purchases
- Categorising expenses to match HMRC’s allowable expense categories
- Generating quarterly expense reports ready for your MTD update
- Storing all records for 10+ years, exceeding HMRC’s 5-year requirement
For complete HMRC record keeping requirements, including retention periods and what constitutes valid documentation, see our dedicated guide.
This article is for informational purposes only and does not constitute tax advice. Consult a qualified accountant or tax adviser for your specific situation.
