02 Nov 2026
Within the Autumn Budget, the Government has amended the Making Tax Digital timetable, with overhauls for the way the self-employed and landlords record and pay Income Tax.
MTD for Income Tax (MTD for IT) was rolled out on 6 April 2026 for sole traders and landlords with qualifying gross income above £50,000, with the next phase arriving in April 2027 for those with qualifying income above £30,000.
The Government, however, is delaying MTD requirements to several other taxpayer groups until further notice. In addition, there will be additional flexibility for those joining MTD in April 2027.
As with the first phase of MTD for IT, taxpayers entering the second phase will not receive penalty points for late submission for their first four quarterly submissions, for the 2027/28 tax year.
While this may seem like more breathing space, late payment penalties will still apply and all four quarterly submissions will need to be submitted before HMRC accepts a tax return.
Be aware that this grace period is not available to those already complying with MTD for IT and they will receive penalties from April 2027 if they do not follow the rules.
How do changes to ITSA interact with MTD?
From April 2029, taxpayers who make payments on account will be required to make more regular, automated in-year payments towards their final tax bill, such as by direct debit.
Eligible taxpayers with sufficient PAYE income, such as from employment or a pension, will be able to opt in to making these payments through PAYE instead.
Payments will be based on a forecast of the taxpayer’s liability, which can be updated if circumstances change, and there are plans to introduce new digital tools to help people estimate their liabilities.
The ITSA shakeup and quarterly reporting under MTD means HMRC will be given a continuous report of income and regular tax payments.
While the traditional tax year is anchored around the 31 January Self Assessment deadline, it will soon become a year-round process.
A core implication is that businesses that report income via Self Assessment will need to budget for payments made throughout the year, so money set aside for tax is not used for working capital.
This may initially lead to a restricted cash flow, as businesses make their final traditional payment on account and adapt to the new system.
Need help with MTD and the changes ahead?
Landlords and the self-employed should prepare for the move to quarterly updates, if not already affected, while reviewing how cash flow may be impacted by regular tax payments.
