MTD for Income Tax (ITSA): what’s actually changing in 2026?

MTD for ITSA is HMRC’s move away from annual, paper-based or spreadsheet-only record keeping. Instead, you’ll keep digital records and send regular updates to HMRC using MTD-compatible software.

From a practical point of view, MTD for ITSA introduces three main obligations:

• Digital records of your business and/or property income and expenses.
• Quarterly updates submitted to HMRC (a summary of income and expenses for each quarter).
• An End of Period Statement (EOPS) to finalise each income source for the tax year.
• A final declaration (this replaces the current Self Assessment tax return in many respects) to confirm everything and declare any other income.

The key thing to remember is that quarterly updates are not the same as a tax return. They are updates, not a final calculation.

Does quarterly reporting mean quarterly payments?

So when will I actually pay my tax?

For many self-employed people and landlords, Income Tax is currently paid through the Self Assessment system:

• 31 January – balancing payment for the previous tax year, plus first payment on account (if you’re in the payments on account regime).
• 31 July – second payment on account.

MTD for ITSA is expected to keep a similar payment approach at the start. What changes is that you’ll have a much clearer picture of how you’re doing during the year, because you’re updating your records and sending figures to HMRC as you go.

Important: quarterly updates are based on the quarters within the tax year (6 April to 5 April), not calendar quarters. Your software will normally guide you, but it’s worth being aware that the dates can feel slightly unusual.

MTD for ITSA rollout timeline (who joins and when)

MTD for ITSA is being phased in based on your qualifying income (broadly, your gross income from self-employment and/or property, before expenses).

If you’re close to one of these thresholds, it’s wise to prepare early. Even if you don’t join until 2027 or 2028, getting your records tidy now will reduce stress later.

What are “quarterly updates” in plain English?

A quarterly update is a summary of your income and expenses for the quarter, sent to HMRC through MTD-compatible software.

They are not meant to be perfect, final figures. In reality, your numbers can change later when you do your proper year-end work (for example, when you:

• post year-end adjustments,
• finalise capital allowances,
• account for private use,
• confirm allowable expenses,
• include any missing invoices or interest statements).

Think of quarterly updates as a way for HMRC to see a running picture of your business or property income. Think of the EOPS and final declaration as the point where everything is properly finalised.

Will HMRC calculate my tax after each quarter?

MTD software may show an estimated tax position based on the information entered so far. HMRC may also provide an estimate in your online account.

However, an estimate is only as good as the data behind it. Early in the year, estimates can be misleading because:

• seasonal businesses may earn most of their income in a few months,
• some costs are annual (insurance, licences, professional fees),
• capital purchases may be treated differently for tax than for bookkeeping,
• you may have other income (employment, dividends, savings interest) not fully reflected quarter by quarter.

So yes, you may see more frequent “tax-like” numbers, but they are usually guidance rather than a bill.

Why it can still feel like “quarterly tax” (even if it isn’t)

Even if your formal payment dates stay the same, MTD can make tax feel more immediate. Common reasons include:

1. You’ll be looking at your figures more often. That’s a good thing, but it can feel like HMRC is “on your shoulder”.
2. Software will often show a running tax estimate. This can prompt you to set money aside more regularly (which is sensible).
3. More up-to-date records mean fewer surprises. Instead of discovering a big bill in January, you can see it building through the year.

Many clients end up choosing to put money aside monthly (or weekly) into a separate savings account. That’s not HMRC forcing quarterly payments — it’s simply good cashflow planning.

What about “payments on account” — will those change?

Payments on account are the current system where you pay tax in advance towards the current year, usually in two instalments (January and July). They typically apply if your Self Assessment tax bill is above a certain level and not mostly collected at source.

MTD for ITSA does not, by itself, remove payments on account. In fact, in the early years of MTD, many people will still be in the payments on account regime.

However, MTD-style record keeping can make it easier to:

• spot early if your income is down, and
• apply to reduce payments on account where appropriate (carefully, because underpaying can lead to interest).

If your profits are likely to fall, it’s worth getting advice before reducing payments on account. It’s absolutely allowed, but it needs to be realistic.

Who is affected? Self-employed people and landlords (most commonly)

MTD for ITSA affects individuals who currently report business and/or property income through Self Assessment. That includes:

• sole traders,
• partners (depending on the final rules for partnerships),
• landlords with UK property income,
• people with a mix of self-employment and rental income.

If you have both self-employed income and rental income, you may have to submit separate quarterly updates for each income source, then finalise each one at year end.

What if I’m under the threshold?

If your qualifying income is below the relevant threshold for that year, you should not be mandated into MTD for ITSA yet. But you may still choose to adopt digital record keeping earlier.

Early adoption can be helpful if:

• your income is rising and you expect to cross the threshold soon,
• you want a clearer view of profitability and cashflow,
• you’d like to reduce the January panic and spread admin through the year.

What records will I need to keep digitally?

In simple terms, you’ll need to keep digital records of:

• sales/income (dates, amounts, and basic details),
• business expenses (again, dates, amounts, and details),
• for landlords: rental income and allowable property expenses.

This doesn’t mean you must scan and store every receipt in an app (though it can help). It does mean your core records must be kept in a digital form that can be used to submit quarterly updates.

If you currently use spreadsheets, you may still be able to use them, but only if they are properly connected to HMRC via bridging software and meet the digital links requirements.

Practical cashflow planning: how to avoid nasty surprises

Even without quarterly tax payments, MTD is a good opportunity to get your tax savings routine working properly.

Common questions we hear (and calm, honest answers)

What should you do now (especially if you start in April 2026)?

If you expect to be mandated in from April 2026 (qualifying income over £50,000), the best approach is steady preparation rather than a last-minute rush.

• Check your qualifying income and confirm when you’re due to join.
• Choose MTD-compatible software that suits how you work.
• Get your bookkeeping routine in place (weekly is ideal).
• Keep business and personal spending separate where possible (a separate business account helps).
• Plan for tax savings so payments on account and balancing payments don’t catch you out.

If you’re already working with an accountant, ask them how they’ll handle quarterly updates and what they need from you. If you’re doing things yourself, build a simple system you can keep up all year.

A note on Limited Companies (and why 2026 is different)

If you’re a director who also has rental income or self-employed income personally, you may still be brought into MTD for ITSA for that personal income, even if your company’s Corporation Tax isn’t yet under MTD.

Key takeaways: do you have to pay quarterly?

• MTD for ITSA from April 2026 introduces quarterly reporting, not automatic quarterly payments.
• You’ll still need to budget carefully, because more frequent reporting makes your tax position more visible.
• The phased start dates are based on qualifying income: £50k (2026), £30k (2027), £20k (2028).
• Good digital records will help you stay compliant and reduce last-minute stress.

If you’d like, we can help you work out when you join, what software setup suits you, and how to keep your quarterly updates straightforward and accurate without it taking over your life.