Do you need to use MTD?
The requirement depends on your qualifying income from self-employment. For the 2026-27 tax year, you must use MTD ITSA if your qualifying income was more than 50,000 pounds in 2024-25. If you earned 30,000 pounds or more in 2025-26, you join from 6 April 2027. For 2026-27 income of 20,000 pounds or more, the start date is 6 April 2028.
Qualifying income is your total turnover from self-employment before deducting any expenses. It does not include employment income through PAYE, dividends, pensions, or one-off transactions in UK land. If you have both self-employment and property income, these are added together before testing the threshold.
Note that the threshold is tested as MORE than the figure. Exactly 50,000 pounds is not over the limit. Qualifying income of 20,000 pounds or less is an automatic permanent exemption.
Quarterly updates and deadlines
Under MTD ITSA, you send four updates a year. Each update is a summary of your income and expenses by category, cumulative from 6 April. It is not a tax return. You must send an update even if you had no income or expenses in that period.
You can send updates from the end of the period up to the deadline. If you expect no further transactions, you can send up to 10 days before the period ends. The accounting period cannot be changed after the first quarterly update has been sent.
| Period ending | Update deadline |
|---|---|
| 5 July | 7 August |
| 5 October | 7 November |
| 5 January | 7 February |
| 5 April | 7 May |
After each update, you can see an estimate of your tax bill in your software or in HMRC online services. You still submit your annual Self Assessment tax return after the tax year ends, and any tax owed is paid by 31 January.
Carpentry, joinery and CIS
If you work on construction sites, you may be subject to the Construction Industry Scheme (CIS). CIS deductions are made by contractors from payments to subcontractors. These deductions are treated as payments on account towards your tax liability.
Your gross turnover from construction work counts towards your MTD qualifying income. You must keep digital records of your income and expenses, including CIS deductions, to ensure your quarterly updates are accurate. CIS deductions are not an expense; they are a payment towards your tax bill.
Digital records and software
You must keep digital records of your income and expenses. A digital record is created and stored in compatible software. You must keep these records for at least 5 years after the 31 January submission deadline for the tax year.
HMRC does not provide software. You must use compatible software that can create and store digital records, work with your chosen accounting period, and send quarterly updates. An all-in-one product also submits the tax return.
Once a record has been sent to HMRC in a quarterly update, it must not be moved by hand. This means no writing it out in another cell, no cut and paste, and no copy and paste between products. Digital links must be used to transfer data between software if needed.
Penalties for missed deadlines
For tax years after 2026-27, missing a quarterly update deadline results in one penalty point. There is no penalty point for missing a quarterly update in 2026-27, but you must still send the update.
If you reach 4 penalty points, you face a 200 pound penalty. Each subsequent missed deadline adds a further 200 pound penalty. Only one point is charged per deadline, even if you have multiple businesses.
Late payment penalties are separate. In 2026-27, paying 16 to 30 days late incurs a 3% penalty of the tax owed at day 15. Paying 31 days or more late incurs 3% at day 15 and 3% at day 30, plus an annual rate of 10% charged daily from day 31.