A guide to Making Tax Digital for Income Tax for the self-employed and landlords

Taxpayers that may be exempt from the regime will include:

• Those where it is not reasonably practicable for them to use digital tools due to age, disability, remoteness of location or any other reason (often referred to as ‘digital exclusion’)
• Those subject to an insolvency procedure.
• If the business is run entirely by practising members of a religious society or order whose beliefs are incompatible with using electronic communications
• Non-resident companies
• Trustees, executors and administrators
• Foreign businesses of non-UK domiciled individuals
• Foster carers
• Those with no National Insurance Number

If a taxpayer believes they are exempt from the new provisions they must apply to HMRC, setting out the reasons they believe they are exempt and await a decision. HMRC should respond to the taxpayer within 28 days confirming the position.

Once you are mandated into MTD for ITSA, you will only become exempt if your qualifying income falls below the MTD income threshold for three consecutive tax years (based on filed tax returns, or quarterly updates where the deadline has not yet passed for filing the return for a year).

Penalties for late submissions and late payment for taxpayers within MTD will move to a points-based system, similar to the rules for VAT. Taxpayers in MTD will receive a point each time they miss a submission deadline (quarterly updates and year end submission). Points accumulate until a threshold is reached, at which point a £200 penalty will be issued. From that point onwards, any further late submissions will result in an immediate £200 penalty until the penalty position is ‘reset’ (following 4 quarterly updates, or 2 end of year returns) and to have submitted all returns required for the previous 24 months. The existing Self–Assessment penalty regime will continue to apply until you join MTD for ITSA, and for taxpayers outside the scope of MTD for ITSA.

If you already use accounting software to maintain your records you should ask your software provider if their software is compatible and will let you prepare and submit MTD for ITSA submissions.

At present no changes have been proposed to the dates on which tax payments are due. For individuals within the Self–Assessment regime, payments on account may be required on 31 July and 31 January each year, with final balancing payments being due on 31 January following the end of the tax year.

HMRC has started ‘private beta’ testing its systems ahead of the rules coming into force in 2026 and has sent out some communications to individuals who file Self Assessment tax returns to request volunteers.