Making Tax Digital for Income Tax (MTD ITSA) — What Directors Need to Know

What is MTD ITSA?

Making Tax Digital for Income Tax Self Assessment (MTD ITSA) replaces the annual Self Assessment return for affected individuals with quarterly updates submitted digitally to HMRC, followed by a final declaration at the end of the tax year.

Who is affected and when?

• From April 2026: Self-employed individuals and landlords with total gross income from self-employment and/or property exceeding £50,000
• From April 2027: Those with income exceeding £30,000
• From April 2028: Those with income exceeding £20,000 (announced but not legislated)

What directors need to do

Directors who have additional self-employment income or rental income above the threshold will need to use MTD-compatible software to keep records and file quarterly updates. The company's corporation tax return is separate and not affected by MTD ITSA.

However, dividends received from your company count as investment income — they do not count as self-employment income for MTD ITSA purposes. Most directors with only director salary and dividends will not be caught by MTD ITSA at all — unless they have separate self-employment or property income.

Quarterly update content

Each quarterly update reports income and expenses for that quarter. You do not pay tax quarterly — the updates are reporting obligations. Tax is still calculated and paid through the annual Self Assessment process (the 'final declaration').