HMRC currently only provides an ‘opt out’ option after three years of qualifying gross income below the thresholds.

From April 2026, individuals with sole trade and/or property income over £50,000 will be required to file 4 quarterly updates and a final declaration instead of one self-assessment.

Quarterly updates only require summary totals for each category of income and expense for your self-employment or property business. For example:

• Income: sales or rental receipts, any rebates or other income.
• Expenses: rent, repairs and maintenance, travel, utilities etc.

Yes. If you have:

• 2 self-employed businesses
• 2 rental properties
• 1 of each

You must submit a separate update for each source which means potentially more than 4 updates per year.

The Quarterly Update Periods

Under MTD ITSA, updates follow a standard calendar quarter unless you choose otherwise. The default quarters are:

Quarter	Period Covered	Submission Deadline
Q1	6 April - 5 July	5 August
Q2	6 July - 5 October	5 November
Q3	6 October - 5 January	5 February
Q4	6 January - 5 April	5 May

HMRC allows you to use calendar quarters instead which means your quarters run as:

• 1 Apr – 30 Jun
• 1 Jul – 30 Sep
• 1 Oct – 31 Dec
• 1 Jan – 31 Mar

We recommend this calendar-based option for simplicity.

Once all four updates are submitted, a final declaration will need to be filed which:

• Pulls together your year-end position
• Includes other income (employment, dividends, pensions)
• Triggers the final tax calculation
• Requires your approval before submission

This replaces the traditional self-assessment and becomes your official tax return under MTD.

You must keep digital records and complete quarterly submissions for each property if your combined total qualifying income exceeds the relevant thresholds. This applies for non-residents with properties in the UK. If you jointly hold a property, it is your individual share of gross income that applies.

Under MTD ITSA, you must keep digital records of all income and expenses related to your self-employment or property business. This means:

• No more paper receipts in shoeboxes
• No handwritten ledgers
• No spreadsheets that do not connect to HMRC

Instead, your records need to be digitally stored and linked to the software that submits your quarterly and year-end tax updates.

HMRC expects the following to be tracked digitally:

• Date of transaction
• Income/expense category (e.g. rent, repairs, travel)
• Amount received or paid
• VAT details (if applicable)
• Digital copy of invoices or receipts (e.g. photos or scans)

One important MTD term is “digital links.”

A digital link is a connection between pieces of software or systems that transfers data without human intervention.

This means you cannot copy and paste from one spreadsheet to another or retype figures into your submission tool. Instead, the flow of information must be automated between your record-keeping system and your submission software.

Spreadsheets are allowed under MTD ITSA but a bridging software must be used to connect them to HMRC’s systems. Bridging software reads your spreadsheet data and submits it in the required MTD format. This is a great option for people comfortable with Excel but not ready to move to full accounting platforms.

In line with MTD, HMRC has introduced a brand new points-based penalty system for late submissions and penalties, aimed at encouraging compliance while offering a fairer approach than traditional automatic fines.

This new system is already in place for VAT returns and will come into force from April 2026 for MTD ITSA.

Late Submission Penalties:

Under the new rules, every missed submission deadline earns you one penalty point.

This includes:

• Quarterly MTD submissions for income tax or VAT
• Annual VAT returns
• Other scheduled digital submissions under MTD

Once a penalty threshold is reach, a £200 financial penalty is triggered. Thresholds vary based on the submission frequency:

Submission Frequency	Penalty Threshold
Annual	2 points
Quarterly	4 points
Monthly	5 points

Each type of submission is tracked separately. For example, if you have two businesses submitting quarterly returns, HMRC tracks points for each business independently.

How to Remove Points

Points expire after 24 months, but only if:

1. You have brought all outstanding returns up to date;
2. You complete a compliance period without further infractions:
   • 24 months for annual submissions
   • 12 months for quarterly
   • 6 months for monthly

This encourages consistent, on-time filing.

Late Payment Penalties:

The new late payment penalties are time-sensitive and based on how quickly you settle your tax bill after the due date:

Days After Due Date	Penalty
0 - 15 days	No penalty if paid or Time to Pay agreed
16 - 30 days	2% of outstanding tax
31+ days	Additional 2% (totalling 4%)
After 31 days	Daily penalties: 4% per annum on outstanding amount

However, there is a first-year grace period for late payment penalties to adjust to the new regime. HMRC will allow up to 30 days for payment or a Time to Pay agreement before charging the first 2% penalty.