Making Tax Digital for Income Tax Self Assessment, often called MTD ITSA, requires many self-employed people and landlords to change how they keep records and report income to HMRC.

For sole traders, creators, online sellers and freelancers, this is a prompt to move away from the annual January scramble and towards regular digital bookkeeping.

What Is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax is a government system that requires affected taxpayers to keep digital records and send quarterly updates to HMRC using compatible software.

Instead of relying on one annual Self Assessment process, you or your accountant send HMRC regular summaries of income and expenses during the year, then finalise the position at the end of the tax year.

The aim is to reduce errors and bring the UK tax system closer to real-time reporting. HMRC explains the rules in its Making Tax Digital for Income Tax guidance.

Who Does MTD ITSA Affect?

MTD ITSA applies in phases to people with qualifying income from self-employment and property above HMRC thresholds.

Qualifying income broadly means income before expenses. This is important: if your turnover is above the threshold but your profit is lower, you may still be within the rules.

Gross income matters. If you earn £55,000 before expenses and your profit is £30,000, HMRC may still treat you as above the relevant threshold for Making Tax Digital.

If you are unsure whether you are affected, use HMRC's guide to check if and when you need to use Making Tax Digital for Income Tax.

What Changes Under MTD ITSA?

Under the old approach, many self-employed people kept records however they liked and pulled everything together once a year for Self Assessment.

Under MTD ITSA, affected taxpayers must usually:

  • Keep digital records of business income and expenses
  • Use MTD-compatible software
  • Submit four quarterly updates each year
  • Complete the required end-of-year finalisation
  • Keep records updated throughout the year

The quarterly submissions are not full tax returns. They are summaries of income and expenses, but they still need to be based on accurate digital records and submitted on time.

What Software Do You Need?

HMRC requires compatible software. Popular options include Xero, QuickBooks, FreeAgent and other approved tools.

Spreadsheets on their own are not usually enough unless they are connected through compatible bridging software. For most growing businesses, cloud accounting software is the simpler long-term option.

At Simplr Accounting, we help clients choose and set up the right software, build sensible categories and manage submissions on their behalf.

What Does This Mean for Creators and Online Sellers?

Content creators and online sellers often have more complicated income than they realise. Money can arrive through platforms, payment processors, marketplaces, affiliate networks and direct client invoices.

MTD ITSA means:

  • You need to track income and expenses digitally throughout the year
  • Quarterly deadlines become part of your routine
  • Good bookkeeping habits become essential
  • Multiple income streams need clearer categorisation
  • Receipts and platform reports need to be saved properly

If you already work with a specialist accountant using cloud software, the transition should be much easier. If your records are still spread across screenshots, bank statements and inbox searches, now is the time to tidy them.

What Are the Penalties for Non-Compliance?

HMRC uses a points-based penalty system for late submissions. Missing submission deadlines can build up points, and once a threshold is reached, financial penalties can apply.

This is separate from late payment penalties and interest. The safest approach is to build a workflow that keeps your records current and lets your accountant submit updates on time.

Steps to Take Now

You do not need to panic, but you should get organised before the rules apply to you.

01Check your qualifying income: look at gross self-employment and property income before expenses.
02Choose compatible software: use a system that can handle digital records and MTD submissions.
03Start digital bookkeeping now: connect bank feeds, upload receipts and categorise income monthly.
04Review your current records: check whether income, expenses, mileage, platform fees and payment processor deductions are recorded properly.

If you are close to the threshold or already above it, speak to an accountant about the best setup for your business before quarterly reporting becomes urgent.

Let Simplr Handle Your MTD Transition

At Simplr Accounting, we are already helping clients prepare for Making Tax Digital for Income Tax. As part of our service, we can set you up on cloud accounting software, organise your bookkeeping categories, manage quarterly submissions and keep you compliant.

This is especially useful if you have multiple income streams, such as brand deals, affiliate income, marketplace sales, subscriptions, digital products, freelance work or rental income.

See our Making Tax Digital service and pricing for more details.

Final Thoughts

Making Tax Digital is not optional once the rules apply to you. But it does not need to be painful if your bookkeeping is already clean.

The businesses that will find MTD easiest are the ones that stop treating bookkeeping as an annual admin task and start treating it as a monthly habit.

Further reading