Making Tax Digital (MTD) is all about making tax much easier by moving things online. If you run a business, are self-employed, or rent out property, you’ll soon need to keep your records digitally and send updates to HMRC a few times a year.
The most common questions we have seen asked are shown and answered below:
1. Who must comply with MTD for ITSA?
Sole traders and landlords with total combined income from self-employment and/or property must comply with MTD for ITSA if:
Their combined income exceeds £50,000 from April 2026
Their combined income exceeds £30,000 from April 2027
Combined income means the total gross income from all relevant self-employment and property rental sources.
2. What do I need to do under MTD?
Under Making Tax Digital (MTD), you’ll still be responsible for reporting your income and paying your tax — but how you do it is changing: You now need to:
Keep Digital Records
Submit Quarterly Update
File a Final End of Period Statement (EOPS)
Keep digital records
Instead of paper records or manual bookkeeping, you must keep your income and expenses in a digital format — either:
In MTD-compatible software, or
In a spreadsheet that connects to HMRC via bridging software
Previously, you might have:
Written income/expenses in a notebook
Stored receipts in a shoebox
Typed totals into your Self-Assessment form once a year
Under MTD, that’s no longer allowed. Your records must now be:
Updated regularly (not just at year-end)
Structured and stored digitally
Linked to your MTD submissions
Submit quarterly updates
You’ll need to send a summary of your income and expenses to HMRC every three months.
Instead of one annual return, you'll now:
Send 4 updates per year
Each update includes a basic summary (no detailed tax calculations)
Deadlines fall one month after the quarter ends
(e.g. 5 August for the quarter ending 5 July)
You’ll still be able to view and adjust these later at year-end.
File a final End of Period Statement
At the end of the tax year, you’ll:
Confirm your income and expenses are accurate (EOPS)
Make any necessary adjustments (capital allowances, reliefs, etc.)
Submit a Final Declaration (this replaces your annual Self Assessment return)
Instead of preparing and submitting everything at once by 31 January, you’ll:
Be submitting little and often during the year
Use software to track totals and prepare year-end summaries
Still have to pay your tax by the usual deadlines
The tax rules haven’t changed — but the way you record and report your information has.
3. What if I already use accounting software?
You will need to make sure it is going to be Making Tax Digital compliant. Coconut is our solution for this.
4. Are there penalties for missing deadlines?
Yes - HMRC will introduce a points-based penalty system. Repeated late submissions may lead to fines.
5. Will this replace the Self-Assessment tax return?
Yes - instead of one yearly return, you’ll file four quarterly updates and a final declaration.
6. Can I opt out?
Exemptions apply in certain cases (e.g., age, disability, or no internet access). You will need to apply for an exemption on HMRC's website.
7. When should I start preparing?
Now. Early preparation gives you more options and less stress. Contact support if you want a list of our upcoming webinars.
8. Can I start quarterly submissions early?
Yes, you can join HMRC's beta program that allows you to submit quarterly updates early. You will need to register direct with HMRC, and once MTD has been activated on your account, you can get in touch with us in order to join our Pilot scheme for MTD beta testers. If you want to join our Pilot scheme, you should select the current tax year (25/26) when signing up with HMRC.
9. Will training and onboarding be available?
Absolutely. We can point you in the right direction to get setup with Making Tax Digital and we have help articles/videos to guide you through the process. If you need help during the process, get in touch with our support team.
10. I have multiple properties/income streams — what now?
We’ll help consolidate your reporting to ensure it's accurate and fully compliant. You will need to set up a separate income stream on Coconut for each type of income (Sole trade/property) and your obligations for each income stream can be reported.