The short answer is simple: MTD does not change how much tax you pay or when you pay it — it changes how you report your income.
Under Self Assessment, you file one tax return a year. Under Making Tax Digital for Income Tax (MTD ITSA), you keep digital records and send four quarterly updates through compatible software, followed by a final declaration. Your tax is still due on 31 January (and 31 July for Payments on Account).
Here is a side-by-side comparison of how the two systems differ.
What Is the Difference Between MTD and Self Assessment?
Making Tax Digital (MTD) for Income Tax replaces the traditional annual Self Assessment return with quarterly digital updates and a final declaration, filed through MTD-compatible software. It does not change how much tax you pay, your tax rates, or your payment deadlines — only how and how often you report your income. Under Self Assessment you file one return a year on HMRC’s website; under MTD you send four quarterly updates plus a final declaration through software that connects to HMRC’s API.
MTD vs Self Assessment: Side-by-Side Comparison
| What changes | Self Assessment | Making Tax Digital |
|---|---|---|
| Filing frequency | 1 annual return (SA100) | 4 cumulative quarterly updates + 1 final declaration |
| Filing deadline | 31 January after the tax year ends | Quarterly: 7 August / 7 November / 7 February / 7 May. Final declaration: 31 January |
| Record-keeping | Paper or spreadsheet — your choice | Mandatory digital records in MTD-compatible software |
| Software required | Optional (you can file free on HMRC online) | Required — or spreadsheet + bridging software |
| Who’s in scope | Anyone HMRC asks to file | Sole traders and landlords above the qualifying income threshold |
| Threshold | n/a | Over £50,000 from April 2026; over £30,000 from April 2027; over £20,000 from April 2028 |
| Tax payments | 31 January (balancing) + 31 July (Payment on Account) | Same dates — payment timing does not change |
| Penalty regime | Fixed late-filing and late-payment penalties | Points-based for late submissions; percentage-based for late payment |
| Visibility of tax position | Once a year, in January | Real-time running estimate after each quarter |
| Admin time | Concentrated in January | Spread across the year, if records are kept current |
| Cost of compliance | Free filing via HMRC online | Software cost (free MTD options exist) |
The Headline Differences
Cadence. Instead of one annual Self Assessment return, you send four cumulative quarterly updates and a final declaration. The quarterly updates are cumulative — each one shows your year-to-date income and expenses, not just the figures for that quarter. By the fourth update, HMRC has a full year of data. The final declaration is where you add adjustments (capital allowances, pension contributions, losses brought forward) and confirm your final tax position.
Records. Shoeboxes, paper ledgers and ad-hoc spreadsheets are replaced by digital records stored in MTD-compatible software. According to HMRC’s guidance on keeping records for MTD for Income Tax, you must keep a digital record of each business transaction: the date, the amount, and whether it’s income or an expense. If your turnover from an income source is over £90,000, you also need to categorise expenses by type. Under £90,000, three-line accounts (total income, total expenses) are sufficient.
Tools. HMRC’s free online Self Assessment service is replaced by third-party software that connects to HMRC’s API. Free and low-cost options are available — see our cheapest MTD software for sole traders guide for the full list. You cannot file MTD updates through HMRC’s website directly.
Penalties. The late-filing penalty system becomes points-based. Late quarterly submissions may not trigger penalties immediately, but reaching the points threshold results in a £200 fine. For full details, see our MTD penalties guide and our Self Assessment penalties guide.
Visibility. You get a running estimate of your tax position after each quarter, rather than finding out the total in January. This is one of HMRC’s stated aims for MTD — reducing the “January surprise” where sole traders discover a large bill they haven’t budgeted for. See our payment on account explained guide for how the payment schedule works under both systems.
What Stays Exactly The Same
- Income Tax bands and rates (20% / 40% / 45%).
- Personal Allowance (£12,570) and the £100,000 taper.
- Class 2 and Class 4 National Insurance.
- Payments on Account (31 January and 31 July).
- Balancing payment date (31 January).
- Allowable expenses and capital allowances rules.
- What you can claim and what you can’t — the wholly and exclusively test is unchanged.
This is the point HMRC repeats most often: MTD is not a new tax. The tax you owe is calculated the same way. Only the reporting process changes. According to HMRC’s overview of MTD for Income Tax, the system “will not change the tax you pay, just the way you record and report your income.”
A Worked Example: The Same Sole Trader Under Both Systems
To see the difference in practice, consider a freelance graphic designer with £65,000 turnover and £12,000 expenses in the 2026/27 tax year.
Under Self Assessment (the old system):
- Throughout the year, the designer keeps records however they like — a spreadsheet, a shoebox of receipts, or nothing until January.
- In January 2027, they gather everything, log into HMRC’s online Self Assessment service, and fill in the SA100 plus the SA103F (self-employment supplementary page).
- They enter total turnover (£65,000), total expenses (£12,000), and profit (£53,000).
- HMRC calculates the tax due. The designer pays any balancing payment by 31 January 2027 and makes their first Payment on Account by the same date.
- Total filing events: one. Total time spent on the return: concentrated in January.
Under MTD for Income Tax (the new system):
- Throughout the year, the designer records each transaction in MTD-compatible software — the date, the amount, and whether it’s income or an expense. The software imports transactions via bank feed, so most are already there.
- By 7 August 2026, the software has the first quarter’s figures (6 April to 5 July). The designer reviews them, clicks submit, and the software sends the first quarterly update to HMRC via API. The software shows an estimated year-to-date tax position.
- By 7 November 2026, the second quarterly update (cumulative — covering 6 April to 5 October). Review, submit.
- By 7 February 2027, the third quarterly update (6 April to 5 January). Review, submit.
- By 7 May 2027, the fourth quarterly update (6 April to 5 April — the full year). Review, submit.
- By 31 January 2028, the final declaration. The designer adds adjustments not captured in the quarterly updates — pension contributions, capital allowances on a new computer, Gift Aid — and confirms the final tax position. The software submits the declaration to HMRC.
- Total filing events: five (four quarterly updates + one final declaration). Total time: spread across the year, but each event is shorter than the annual return.
The tax bill is the same. The payment dates are the same (31 January and 31 July). The difference is the rhythm: five shorter submissions instead of one long one, with records kept current rather than reconstructed in January.
What Changes by Taxpayer Type
The MTD vs Self Assessment comparison plays out slightly differently depending on your situation.
Sole trader with one trade: The most straightforward case. Your quarterly updates cover your single self-employment income source. If your turnover is under £90,000, you can use three-line accounts (total income, total expenses) for your quarterly updates — no expense categorisation needed until the final declaration. See our how to file MTD guide for the full step-by-step.
Landlord with rental income: Rental income is UK property income, which counts toward your MTD qualifying income. You send quarterly updates for your property income source separately from any self-employment income. The abolition of the Furnished Holiday Lettings regime means most short-term lets are now treated as standard property income. See our MTD for landlords and non-residents guide.
Sole trader with multiple trades: You send separate quarterly updates for each separate trade. A plumber who also sells online has two trades and two sets of quarterly updates. A delivery driver working for both Uber and Deliveroo has one trade (delivery). See our MTD with multiple trades guide for the full rules.
Someone with both self-employment and property income: Both count toward your qualifying income threshold, but you send separate quarterly updates for each income source. The threshold is based on the combined total, not each source individually. See our MTD qualifying income thresholds guide.
Someone below the threshold: If your qualifying income is £20,000 or below, you’re automatically exempt and continue filing Self Assessment as normal. Between £20,000 and the threshold for your phase, you’re not in scope but can volunteer. See our MTD exemptions guide.
What Happens to Your Existing Self Assessment Records
Your Self Assessment records don’t disappear when you move to MTD, but how you keep them changes.
Record retention: Under Self Assessment, sole traders must keep records for 5 years after the 31 January submission deadline. Under MTD, the retention requirement is the same — but your records are now digital, stored in your MTD-compatible software. If you switch software, you need to export your records before closing the old account. See our do you need an invoice to claim an expense guide for the full record retention rules.
Amendments: Under Self Assessment, you can amend your return within 12 months of the filing deadline. Under MTD, the amendment window for the final declaration is the same — 12 months after 31 January. Quarterly updates can be corrected in the next quarterly update (since they’re cumulative) or at the final declaration. See our fix tax return mistakes and refunds guide for the amendment process.
Years before MTD: Tax years before you joined MTD stay on the Self Assessment system. You don’t need to resubmit old returns as quarterly updates. HMRC’s MTD start date is per taxpayer, based on when your qualifying income crosses the threshold. See our how to register for MTD guide for the registration timeline.
What This Means for You
If your qualifying income is above the threshold for your phase, you need to:
- Register for MTD before your start date.
- Choose compatible software — see our cheapest MTD software for sole traders guide.
- Keep digital records throughout the year.
- Submit quarterly updates by the relevant deadlines.
- Submit the final declaration by 31 January and pay any tax owed.
For a full breakdown of the thresholds and dates, see our MTD qualifying income thresholds guide. Use our MTD qualifying income calculator to check whether you need to register. For the complete preparation checklist, see our MTD readiness checklist.
The Bottom Line
Self Assessment is one annual return, often prepared at the last minute. MTD is a quarterly rhythm with a year-end finalisation. The tax bill itself — and the deadlines for paying it — stay the same. The main shift is moving from once-a-year record entry to continuous digital record-keeping. If you keep your records current throughout the year, each quarterly update is a review-and-click-submit exercise. If you don’t, MTD forces the January panic to happen four times a year instead of once.
For the full MTD roadmap, see our Making Tax Digital guide. For practical help with quarterly updates, see our MTD quarterly updates guide. For threshold details, see MTD qualifying income thresholds. For profession-specific guidance, see MTD by profession.