We’ve created this FAQ list to help you understand a little more about MTD for ITSA and how it might impact you…
Q: What’s changing?
A: From April 2026, instead of filing just one annual Self-Assessment tax return, affected taxpayers will need to send quarterly updates of income and expenses to HMRC through approved software (like Xero), plus a final “end-of-year declaration.”
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Q: Why is HMRC doing this?
A: HMRC wants tax reporting to be more digital, timely and accurate. By receiving data throughout the year, rather than once annually, they can build a more up-to-date picture and spot issues sooner.
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Q: Who will need to comply?
A: These changes affect Sole Traders and Landlords.
If your total self-employed income or property income (or both) is over £50,000, you’ll be included from 6 April 2026.
This is your total TURNOVER, not profit.
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Q: Are partnerships included?
A: Not yet. Partnerships are currently outside the scope, although HMRC has said they may be added in future.
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Q: Will I need to pay tax quarterly?
A: No. You’ll be sending quarterly updates to HMRC, but your actual tax payments remain due in January and July, just as they are now.
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Q: What are the benefits for me as a taxpayer?
A: While this new process does add some cost and admin, there are positives:
• Fewer surprises – you’ll have a clearer idea of how much tax you’ll owe.
• Better budgeting – easier to set money aside and plan cash flow.
• Less paperwork at year end – we hope this will make the final return quicker.
• Digital records – receipts and paperwork stored securely in Xero.
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Q: What will the process look like?
A: Following agent athorisation being received we’ll run the process for you as follows:
• If you don’t already use Xero, we’ll set up an account for you.
• Your business and/or rental bank accounts will be linked, so transactions can feed in to the software automatically.
• Each quarter we’ll prepare and send HMRC a summary of your income and expenses (called a “Quarterly Update”). These updates are cumulative, so each one builds on the last.
• At year end we’ll prepare your full Self-Assessment, making any final adjustments and claims for allowances.
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Q: When is each quarterly update due?
A: Submissions will be required as follows:
Period Ending 5th April DUE 7th May
Period Ending 5th July DUE 7th August
Period Ending 5th October DUE 7th November
Period Ending 5th January DUE 7th February
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Q: Do I need to approve each quarterly submission?
A: No. Once you’ve confirmed your records are complete and accurate, we can file without your sign-off each quarter. You’ll only need to formally approve the final end-of-year declaration.
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Q: What if I make a mistake or forget a transaction?
A: Don’t worry. Errors or omissions can be corrected in your digital records, and the next quarterly update will reflect the right position. There’s no need to resubmit earlier quarters.
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Q: What if I miss a quarterly deadline?
A: HMRC will apply a penalty points system:
• One late submission in any 24-month period is allowed.
• After that, each late submission earns a penalty point.
• Reach the limit (e.g. 4 points) and you’ll face a £200 fine, plus further penalties for future late filings.
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Q: Will HMRC penalise me for differences between quarterly updates and my final return?
A: No, small differences are expected because quarterly updates don’t include all year-end adjustments. However, large or frequent inconsistencies may trigger HMRC queries.
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Q: What will a4c do, and what do I need to do?
A: To keep things clear we will be issuing new engagement letters to outline our respective obligations, for instance:
• We will: set up the MTD connections, prepare and file your quarterly updates, check data quality, and submit your final Self-Assessment (with your approval).
• You will: keep your bookkeeping up to date and provide all income and expense records promptly.
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