UK Tax - MTD for ITSA Updated

The MTDfITSA saga has been running for many years, and as of 23 November 2023, this is the current state:

Go live: start 5 April 2026 and apply to a way smaller base than the original intended group of 4.5 million users.   These are the key changes and points: 

• Who is in?  Self-employed people and property landlords (outside of Limited companies) need to register.  Initially, landlords with joint property ownership are not mandated to join (HMRC must provide more information).  Individuals MTDfITSA that previously did a Self Assessment can have ten or multiple self-employment businesses and 0 to 3 (4 - Foreign property is unclear) property businesses under MTDfITSA (Ord UK property, FHL UK, FHL EEA, Foreign property).
• Who is out?  Partnerships are out, and non-dom status (has specific rules).  If a person is currently self-employed but has complications such as joint individual property ownership that generates rental income, being a partner in a partnership - will mean you are outside and continue to fill in self-assessments.  Trusts/estates, LLP and Ltd are out at the start.  Specific exemptions for income from foster care and individuals without a National Insurance Number do not need to register for MTDfITSA.
• EOPS concept is removed from MTD for ITSA. 
• Quarterly submissions are now cumulative booking numbers for the business.  The quarterly figures are cumulative per business for the year, i.e. Q2 submission consists of all data from Q1 and Q2.  Unlike VAT, ITSA quarters are cumulative during the year, whereas VAT is for a specific quarter.
• For each self-employed business or property business, a quarterly per-business submission is due to HMRC within 30 days of the quarter’s completion.  Declaration per business is still required (31 January the following year). 
• A single crystallisation submission for the user at the year-end is due 31 January each following year.  A yearly declaration is also required.

·       Digital links/keeping (digital records).  Can’t re-key/copy and paste.   There is no requirement to use bank feeds/PDS2 data.  Some booking software firms will likely file quarterly MTDfIT returns for each self-employed (and property) business.  Spreadsheets are an acceptable form of record-keeping.   Excel and bridging software are sufficient for the source for filing.  Recording sales can use daily sales totals for the digital source but, ideally, link to the raw input system.  

·       Quarterly submissions requiring corrections are cumulative now, so you merely correct a mistake by adjusting in the next period/quarter.

• Starting 6 April 2026, this shall apply to less than 750k users
• Self-assessment people with a combined income of £50k for the two years previous need to register for MTDfITSA; the plan is to drop to £30k the following year.
• There is a new penalty system.  Late payment has interest penalties, basically no penalty for 15 days late, then 2% for 16-31 days and then 4% is paid after this.  4% is on the outstanding balance from the day past due.  Payment is due the following year on the 31 January.  There are points, fines, and interest charges.  Penalty points for late filing, missing four quarters in 24 months, is £200 penalty.  Record of last 24 months retained. 

Summary of comparison between ITSA & SA:

SA	ITSA
1 SA return is done each year per person.	Four quarterly returns via approved software per business required a digital record link to the underlying transactions per self-employed business. Ask HMRC to explain how to correct business totals for the year as 1.  missing types of expenses, 2.  As EOPS was removed, assume you have 30 days to finalise business accounts from business year-end, bringing this forward nearly eight months. Crystallisation/Finalisation using HMRC-approved software per person, not per business.
Paper submission due 31 October for the previous year. Online submissions are due 31 January – 9 months after the financial/tax year-end.	Approved Digital Software to submit (no paper returns). One month after each quarter, submit the quarterly cumulative return. No EOPS is due on 31 January the following year with new rules.   The Crystallisation/Finalisation/Final Declaration is also due 31 January the following year.

Quarterly MTDfITSA is done per business and is due one month after the quarter period ends.  Property business quarters and year-end run in the same cycles as personal tax, starting on 6 April and ending the following year on 5 April.  As MTDfIT begins on 6 April 2026, the four quarterly submissions for the 2026-2027 tax year and filling due dates are:

Qrt start date	Qtr end date	Qtr submission due date
6 Apr 2026	5 July 2026	5 Aug 2026
6 July 2026	5 Oct 2026	5 Nov 2026
6 Oct 2026	5 Jan 2027	5 Feb 2027
6 Jan 2027	5 Apr 2027	5 May 2027

 

Self Assessment filling options:

1. Most people use the current XML online filing done on 31 January after the personal tax year.  +-11 million people 2026/2027.
2. Some people still use paper-based self-assessments due Oct after the tax year.
3. MTD for ITSA will be due one month after each business quarter, and the finalisation/crystallisation process is due 31 January, the year after the personal tax year.  As HMRC calc tax, declarations are required from the taxable individual for the year and after each quarter per business. +-500k people