Making Tax Digital for Income Tax: What Changes in April 2026
Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is HMRC's most significant reform to personal tax administration in decades. From April 6, 2026 — the start of the 2026/27 tax year — self-employed individuals and landlords with qualifying income above £50,000 must maintain digital records and submit quarterly updates to HMRC using HMRC-compatible MTD software. This replaces the traditional annual Self Assessment tax return for in-scope taxpayers, transforming tax reporting from a once-a-year exercise into a continuous digital process.
The mandatory scope then expands in subsequent years: from April 6, 2027, the threshold drops to £30,000 qualifying income; and from April 6, 2028, it drops further to £20,000. This phased approach means that the universe of MTD for ITSA taxpayers will grow substantially over the next two tax years, ultimately covering the majority of self-employed individuals and property landlords in the UK.
The Four Quarterly Updates and Final Declaration
Under MTD for ITSA, in-scope taxpayers must submit four quarterly updates to HMRC for each business or property income source, each covering a three-month period. The quarters align with the tax year rather than calendar quarters:
- Quarter 1: April 6 to July 5 — submission due August 7
- Quarter 2: July 6 to October 5 — submission due November 7
- Quarter 3: October 6 to January 5 — submission due February 7
- Quarter 4: January 6 to April 5 — submission due May 7
The first submission under the April 2026 mandate — covering Quarter 1 of the 2026/27 tax year — is therefore due on August 7, 2026. Quarterly updates contain summarized income and expense information for the period; they are not the same as a full tax return and do not require the level of detail that a traditional Self Assessment return includes.
Following the four quarterly updates, taxpayers must submit a Final Declaration by January 31 following the end of the tax year. The Final Declaration consolidates the year's quarterly data with any adjustments, claims for reliefs, and information about other income sources, producing the definitive tax liability calculation for the year. For the 2026/27 tax year, the Final Declaration deadline is January 31, 2028.
Penalty Framework: Points-Based System
HMRC is implementing a points-based penalty system for MTD for ITSA late submission failures, designed to be proportionate while still providing a meaningful compliance incentive:
- Points accumulation: Each missed submission deadline adds one penalty point to the taxpayer's record.
- Financial penalty trigger: A £200 penalty is charged when the taxpayer accumulates 4 penalty points.
- Record failure penalty: Failing to maintain adequate digital records can attract fines of up to £3,000, reflecting the fundamental importance of digital record-keeping to the MTD system's operation.
Points can be cleared by achieving a period of full compliance — the number of compliant submissions required to reset the counter depends on the filing frequency. This design means that taxpayers who experience temporary difficulties are not permanently disadvantaged, provided they return to compliance promptly.
Grace Period for the First Four Quarters
HMRC has announced a grace period covering the first four quarterly submissions under the April 2026 mandate. During this grace period, late submission penalties will not be charged for the first four quarters, giving taxpayers and their agents additional time to adapt to the new quarterly reporting workflow. This grace period applies to penalty charges only — the obligation to submit quarterly updates remains in force from April 6, 2026.
The grace period should not be misread as a delay to the mandatory start date. Taxpayers must still use HMRC-compatible MTD software and maintain digital records from April 6, 2026. The grace period merely provides breathing room for the initial adjustment to quarterly submission cadence.
Choosing MTD-Compatible Software
HMRC maintains a list of software products that are compatible with MTD for ITSA on its website. Taxpayers must use one of these listed products — spreadsheets, paper records, or non-compatible software do not satisfy the digital records requirement. Many accounting software providers have updated their products for MTD for ITSA compatibility, and some offer specific features for sole traders and landlords managing multiple income sources.
How Arhivix Helps
MTD for ITSA creates a multi-year obligation to maintain accessible digital records supporting every quarterly update and Final Declaration. HMRC can inquire into any tax year within 4 years (or up to 20 years in cases of careless or deliberate inaccuracy), meaning your MTD digital records must be retained and retrievable for extended periods. Arhivix stores your financial documents — invoices, receipts, bank statements, and quarterly submission records — with AES-256 encryption, ensuring that your MTD evidence trail remains intact and tamper-proof. AWS S3 infrastructure provides the long-term availability needed for multi-year retention obligations. The comprehensive audit trail in Arhivix documents every access to your records, providing HMRC with verifiable evidence of your compliance history if your submissions are ever subject to an inquiry.
