5 July 2026: the first MTD ITSA period comes to an end
For many taxpayers, Self Assessment has just entered a new era
Today is not just the end of a three-month period. It is the end of the first real reporting period under the new Making Tax Digital for Income Tax Self Assessment system. For self-employed individuals, CIS subcontractors and landlords who are within scope, the next critical date is 7 August 2026.
Today, 5 July 2026, the first standard reporting period for Making Tax Digital for Income Tax Self Assessment, more commonly known as MTD ITSA, comes to an end. For taxpayers using standard periods, this first period covers income and expenses from 6 April 2026 to 5 July 2026, and the first official deadline for submitting the quarterly update to HMRC is 7 August 2026.
The importance of this day is not only about the calendar. Until now, for many sole traders, CIS subcontractors and landlords, Self Assessment has been treated as an annual exercise: documents gathered late, bank statements downloaded at the end, receipts searched for in a rush, and a return submitted before 31 January. MTD ITSA changes that logic. The system shifts the focus from retrospective annual reporting to digital records kept continuously and regular reporting to HMRC.
In practical terms, 5 July is the first real test of the new regime. Individuals within scope for MTD ITSA from 6 April 2026 should ideally already have compatible software, digital records for the period beginning on 6 April, and records clear enough for the first report. Anyone who has not yet signed up or chosen software should not panic, but should not be relaxed either. There is still time to submit the first quarterly update by 7 August 2026, but this period should be used for organisation, not postponement.
What is MTD ITSA?
MTD ITSA stands for Making Tax Digital for Income Tax Self Assessment. It is the new way in which certain people within Self Assessment must keep records and report their income and expenses to HMRC.
From 6 April 2026, the system applies in its first phase to sole traders and landlords with qualifying income over £50,000. HMRC describes MTD for Income Tax as a new way for sole traders and landlords to report income and expenses to HMRC, using compatible software for digital records, quarterly updates and the final tax return.
This change does not mean that the annual obligation disappears. It also does not mean that every receipt, invoice or bank transaction is sent individually to HMRC. Quarterly updates are periodic reports of total income and expenses, submitted through compatible software. HMRC has described them as “light-touch” updates of income and expenses, not as extra tax returns.
The essential difference is discipline. Under the old model, a taxpayer could leave their records until close to the annual deadline. Under the new model, that becomes much riskier. If the data is not digital, if the software is not authorised, or if income and expenses are not sorted correctly, the first report can become a compliance problem before the tax year is even halfway through.
Who should have been prepared for MTD ITSA from 6 April 2026?
The first stage of MTD ITSA applies to people within Self Assessment who have qualifying income over £50,000, based on income from self-employment and property. For the first phase, HMRC looks at qualifying income from the 2024/25 tax year to determine who must use MTD for Income Tax from 6 April 2026.
The term qualifying income is very important. It is not the same as net profit. In general, it refers to total gross income from self-employment and property, before deducting expenses. Other income, such as PAYE salary, dividends, pensions or savings interest, may be relevant for Self Assessment in general, but they are not included in qualifying income for MTD ITSA in the same way as self-employment and property income.
In practice, this rule can affect sole traders, self-employed workers, CIS subcontractors, landlords and people who combine self-employment income with property income. A CIS subcontractor with gross income above the threshold is not excluded simply because CIS tax is deducted at source. A landlord is not excluded simply because property income may seem simpler than a traditional business. And someone with two sources, for example self-employment and rental income, must look at the overall picture.
MTD ITSA is not, in itself, an obligation for Limited Companies as entities. A Limited Company has its own obligations, such as accounts, Corporation Tax and CT600. MTD ITSA relates to individuals within Self Assessment where there is relevant income from self-employment and/or property. A director of a LTD company may only be affected personally by MTD ITSA if they separately have relevant personal income, such as property income or self-employment income outside the company.
One important detail is the taxpayer’s responsibility. If someone has not received a letter from HMRC, that does not automatically mean they are not affected. HMRC expects taxpayers to check whether and when they must use MTD for Income Tax.
What happens if you have not signed up yet?
For those who are required to use MTD for Income Tax for the 2026/27 tax year, HMRC says they should sign up now. If they use an agent, the agent can sign them up.
The date of 7 August 2026 should not be understood as an invitation to start preparing then. It is the deadline for the first report. That means the software, authorisation, digital records and data checks must be sorted before then.
If someone has not yet chosen software, the situation should be dealt with quickly. MTD ITSA requires compatible software that can create and keep digital records, submit quarterly updates to HMRC and file the final tax return. HMRC states that the individual or their agent must use software that works with MTD for Income Tax.
In practice, the month between 5 July and 7 August should not be used to decide whether MTD matters. It should be used to confirm whether the person is within scope, sign up, choose software, authorise the software with HMRC and correctly rebuild digital records from 6 April 2026.
The significance of the first report
The first quarterly report is important not because it fundamentally changes the tax calculation, but because it changes the rhythm of the relationship between the taxpayer and HMRC. For the first time, many self-employed individuals and landlords must submit data during the year, not only after the tax year has ended.
This report covers the first standard period, 6 April to 5 July 2026, and must be submitted by 7 August 2026. The next standard deadlines are 7 November, 7 February and 7 May.
From a practical perspective, the first report will expose the difference between those who have genuinely moved to digital bookkeeping and those who have simply assumed that MTD is a formality. For an organised business, the quarterly update can be a relatively straightforward process. For someone who has kept receipts as photos, has not separated personal expenses from business expenses, or has not reconciled bank transactions, the first report can become a warning sign.
This first report also has a psychological significance. It marks the move from the “I’ll sort it at the end of the year” model to the “I keep my records correct throughout the year” model. For the taxpayer, that means less room for improvisation. For the accountant, it means more monitoring and quality control during the year. For HMRC, it means a more digital system and a more regular view of economic activity.
Will the first report change the tax bill?
This is one of the most important clarifications: the first MTD ITSA report does not, by itself, change the final tax bill.
The quarterly update is not the final tax return. It is not the final tax calculation. It does not mean that HMRC finalises your tax liability after the first three months. MTD ITSA does not introduce a new tax. It introduces a new way of keeping records and submitting information to HMRC.
Quarterly updates can help the taxpayer see a more up-to-date estimate of their tax position during the year, but the final tax liability still depends on the final tax return. That is where accounting adjustments, reliefs, allowances, CIS tax deducted, other income sources, pension contributions, student loan, payments on account and other personal tax information can be included. HMRC mentions that one of the benefits of MTD may be a clearer view of the tax bill during the year.
For the 2026/27 tax year, the final tax return through MTD software has a deadline of 31 January 2028.
Therefore, the first report should not be seen as a final payment or as a complete new tax return. It should be seen as the first step in a digital process which, at the end of the year, will support the final tax return. Incorrect data submitted quarterly can be corrected, but disorganised records will make year-end finalisation much harder.
Does MTD ITSA mean tax must be paid quarterly?
No. MTD ITSA introduces quarterly reporting, not a general quarterly payment system for everyone affected.
The confusion is easy to understand. If HMRC receives data quarterly, many people assume that HMRC will also ask for quarterly payment. But the quarterly update is a report of income and expenses, not an automatic new tax payment.
The final tax remains connected to the annual process, including the final tax return and the relevant payment deadline. However, the real advantage of MTD is that it gives the taxpayer a better view during the year. For a CIS subcontractor, it may show earlier whether the estimated refund is realistic. For a landlord, it may highlight whether rental profit is increasing. For a sole trader, it may reduce the surprise at 31 January.
In other words, MTD ITSA does not automatically change how much tax you owe. It changes how early you see the information and how well organised you need to be.
What will happen in the following years?
MTD ITSA is being introduced gradually. The first stage is already underway for those with qualifying income over £50,000. From 6 April 2027, the threshold drops to £30,000, and from 6 April 2028, the threshold drops to £20,000.
This phased introduction is important for those who are not yet affected. A self-employed person with qualifying income of £35,000 may not be in the first phase, but may enter from 2027. A landlord or sole trader with qualifying income of £22,000 may become affected from 2028. For these people, 2026 should not be seen as a year of waiting, but as a year of preparation.
In practice, the transition to MTD should not be done in the month of the deadline. It should be done in good time: choosing software, organising bank accounts, setting clear accounting categories, keeping digital receipts, using mileage logs and maintaining a more regular relationship with the accountant.
Why does qualifying income matter, not just profit?
One of the most dangerous confusions is between income and profit.
For MTD ITSA, the thresholds are generally not checked based on net profit after expenses, but based on qualifying income. This means that someone can have relatively low profit but gross income above the threshold.
For example, a CIS subcontractor may have turnover above £50,000, but after materials, van costs, insurance, tools and other expenses, may be left with much lower profit. For MTD ITSA, the starting point is qualifying income, not the profit left after expenses.
This difference is very important for the Romanian community in the UK, especially in construction. Many subcontractors look at the money left after expenses or after CIS deductions and assume they are not affected. But HMRC looks at the MTD threshold through the lens of relevant income from self-employment and property.
What should self-employed individuals and CIS subcontractors prepare?
For self-employed individuals and CIS subcontractors, the first report should start from clear records of gross income, sales invoices, bank transactions, CIS statements, CIS tax deducted and relevant expenses.
For CIS subcontractors, it is important that the amounts deducted by contractors are treated correctly. CIS tax deducted is not a normal expense, but tax paid at source, which will count in the final calculation. If this amount is treated incorrectly in the software, estimates can become unclear and the final tax return may require corrections.
In the area of expenses, attention should be paid to categories such as materials, tools, insurance, phone, workwear, travel expenses, mileage, subcontractor costs and accountancy fees. Not every payment from the account is automatically deductible, and MTD does not change the deductibility rules. It only changes the way records must be kept and reported.
What should landlords prepare?
For landlords, the focus is on rental income and property expenses. This may include rent received, agent fees, repairs and maintenance, insurance, service charges, mortgage interest information, legal and professional fees and other costs related to the property.
If someone has both self-employment income and property income, the two can be relevant together for the MTD ITSA threshold, because qualifying income looks at the total from self-employment and property before expenses.
For landlords, MTD ITSA can be a significant change because many have been used to preparing rental statements annually. The new system pushes record-keeping towards more regular updates, especially where there are multiple properties, mortgage interest, agent statements or frequent repairs.
What happens with penalties?
For the 2026/27 tax year, HMRC has confirmed that it will not apply penalty points for late quarterly updates. However, this does not mean that the obligation can be ignored. HMRC states that digital records must still be kept and quarterly updates must still be submitted before the final tax return can be filed. Penalties for late tax returns and late payment continue to apply.
After 2026/27, the system becomes stricter. For tax years after 2026/27, if a quarterly update is not submitted on time, a late submission penalty point will be issued, and once the threshold of four points is reached, a £200 penalty may apply.
This is a transitional concession, not a cancellation of the obligation. The message for taxpayers is simple: the first year may be softer on penalty points for quarterly updates, but MTD ITSA is not optional for those within scope.
Why does this matter now, not in January 2028?
One of the major risks of MTD ITSA is that people treat it like the old Self Assessment system, only with an extra piece of software. That interpretation is wrong. MTD is not just a change in format; it is a change in tax behaviour.
Under the old model, a taxpayer could compensate for disorganisation through a big effort at the end of the year. Under the new model, disorganisation appears much earlier. If you do not have digital records in July, you do not only have a problem for January 2028. You have a problem for the first quarterly update in August 2026.
For accountants, this change moves the professional role from “preparing the return at the end” to “monitoring data quality throughout the year”. For taxpayers, it shifts responsibility from reaction to discipline. For HMRC, it creates a more digital system, with more regular data and a more up-to-date view of economic activity.
What should be done between 5 July and 7 August 2026?
The period between 5 July and 7 August is the first real window of action for those affected. It is not a long period, but it is enough for those who act quickly.
Taxpayers within scope should check whether they have an MTD ITSA obligation, confirm the relevant qualifying income, choose compatible software, sign up or authorise their agent, organise digital records from 6 April 2026 and check income and expenses before submitting the first quarterly update.
For those working with an accountant, this is the right moment to send bank statements, invoices, receipts, CIS statements, rental statements and any other relevant information for the first quarter. For those trying to do it themselves, this is the moment to check very carefully whether the chosen software is compatible with MTD ITSA, not just a simple spreadsheet or a record-keeping app with no connection to HMRC.
Conclusion: a small day in the calendar, a big change in the system
5 July 2026 may seem like just the end of a three-month period. In reality, it is a transition moment for Self Assessment in the UK.
For those affected by MTD ITSA, the first standard period has closed. By 7 August 2026, the first quarterly update must be submitted through compatible software. The report does not by itself change the tax bill, does not create a new tax and does not automatically mean quarterly payment. But it changes how income, expenses and documents must be managed.
Those who have not yet signed up or chosen software still have a short window of action. It is not too late to prepare, but it is too late to postpone.
The practical rule is this:
Do not wait until 7 August to start. Use the period between 5 July and 7 August to get ready.
Need help with MTD ITSA?
DCTaxAgent can help self-employed individuals, CIS subcontractors, landlords and small businesses in the UK with MTD ITSA sign-up, choosing the right software, setting up QuickBooks or other compatible software, digital bookkeeping, quarterly updates, CIS Tax Returns, Self Assessment, property income reporting and preparation for the first MTD ITSA deadline on 7 August 2026.
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Website: www.dctaxagent.co.uk
Disclaimer
This article is for informational and educational purposes only and does not constitute personalised tax advice, legal advice or advice regarding employment status.
MTD ITSA rules may depend on each person’s exact circumstances, level of income, income sources, software used, position with HMRC and any applicable exceptions.
DCTaxAgent accepts no responsibility for decisions made solely on the basis of this article without personalised advice. For a correct analysis, speak to an accountant or tax adviser.