Sole Traders and Landlords are about to see big changes in the way they report tax. Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is on the horizon, and it will affect millions of people who work for themselves.

But what does it actually mean for you? Do you have to file more tax returns? Pay tax every quarter? Buy new software?

Common questions about MTD ITSA

We know there’s a lot of confusion, so we’ve pulled together this MTD for Income Tax FAQ to give you the answers you need, without the extra confusion.

1. Do I have to submit four tax returns every year?

No. You’ll still only complete one annual tax return each year. What’s new is that you’ll also send quarterly updates of your income and expenses to HMRC using MTD-compatible software. These are summaries that software (like Crunch!) creates.

At the end of the tax year, you’ll finalise everything in your annual tax return, including any adjustments, just like you do now.

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2. What are quarterly updates?

Quarterly updates are snapshots of your income and expenses. Your MTD-compatible accounting software will total everything up and send the figures directly to HMRC. You don’t need to make any tricky tax or accounting adjustments at this stage.

3. Will I have to pay tax every quarter?

No. HMRC isn’t changing how or when you pay tax. You’ll still pay your bill once a year, by 31 January following the tax year. If you currently do payments on account then so far it looks like that will stay the same. 

The idea is that doing quarterly updates will actually help you get a better estimate of your bill, so help you budget better. 

4. Do I need to keep extra records?

Not extra, just digital. You’ll continue recording income and expenses as you do now, but they’ll need to be stored in MTD-compatible software.

5. What is MTD-compatible software?

MTD-compatible software (like Crunch!) is software that can:

• store your digital records
• send quarterly updates
• submit your annual tax return
• receive messages back from HMRC

You can use more than one tool that links together, or choose one platform like Crunch that does everything in one place.

6. When will I need to join MTD ITSA?

The rollout is being phased in:

• From April 2026: Sole Traders and Landlords with income over £50,000
• From April 2027: income over £30,000
• From April 2028: income over £20,000

If your income is below £20,000, you won’t be required to join (as of information currently provided), but you can sign up voluntarily.

7. How does MTD help reduce mistakes?

By keeping your records digital and submitting them regularly, there’s less chance of errors, lost receipts, or last minute panics.

In fact, HMRC’s own research into MTD for VAT showed nearly half of businesses felt more in control of their finances after making the switch.

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8. What happens if I miss a quarterly deadline?

From April 2026, HMRC will introduce a points based penalty system:

• one point for each missed submission
• reach four points and you’ll get a £200 fine
• points can be reset if you file on time for a set period

During the voluntary testing phase before 2026, no penalties will apply (based on current information released).

9. What if I can’t use digital tools?

If you genuinely can’t keep digital records or use software, you may be able to apply for an exemption.

Some groups are also deferred until at least April 2029, including Ministers of Religion, Lloyd’s Underwriters, and those receiving the Blind Person’s Allowance.

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Crunch makes MTD simple

MTD for Income Tax doesn’t have to be complicated. With Crunch’s MTD-compatible software, you can keep all your records, submit your quarterly updates, and file your annual tax return in one place.

And if you ever need a hand, our expert accountants are here to guide you through. Ready to take the stress out of MTD ITSA? Find out how Crunch can help you today.

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