Self Assessment tax returns: how MTD changes the way you file

Published Monday 15 December 2025

Table of contents

• Why is Self Assessment changing?
• How does Self Assessment tax work currently?
• How MTD for Income Tax will change Self Assessment
• What software do you need for MTD for Income Tax?
• Are there any benefits to the changes in Self Assessment under MTD for IT?
• Prepare for Self Assessment changes today
• FAQs on Self Assessment changes

Key takeaways

• Self Assessment is changing through Making Tax Digital for Income Tax, which replaces the traditional annual tax return with quarterly digital updates starting April 2026 for those earning over £50,000 from self-employment or property rental.
• The changes require MTD-compatible software for quarterly submissions, ending the option to use HMRC's online portal or paper forms for affected taxpayers. You'll still submit a final declaration by 31 January for additional income sources like savings and investments, even after completing your quarterly updates.
• Digital record-keeping becomes mandatory under MTD. Cloud-based accounting software can help you meet this requirement by automatically compiling data and submitting updates directly to HMRC throughout the tax year.
• If your income from self-employment or property rental doesn't exceed the MTD thresholds (starting at £50,000 in April 2026), you'll continue using the current Self Assessment system with no changes to how you file your annual tax return.

Why is Self Assessment changing?

Self Assessment is changing due to Making Tax Digital for Income Tax (MTD for Income Tax) – HMRC's digital replacement for the traditional Self Assessment system. It's part of the government's plan to digitalise the UK tax system and starts in April 2026.

Key reasons for the change:

• Reduce tax errors: Digital systems prevent calculation mistakes and missing information
• Close the tax gap: More accurate reporting means better tax collection
• Match modern business practices: Align tax reporting with digital business tools
• Improve taxpayer experience: Make tax compliance easier and more efficient

Who MTD applies to:

The new rules apply to landlords and sole traders based on their combined qualifying income:

• April 2026: Income above £50,000
• April 2027: Income above £30,000
• April 2028: Income above £20,000

What you'll need to do under MTD:

• send quarterly updates four times per year instead of one annual return
• use compatible software rather than paper forms or the basic online portal
• submit a final declaration by 31 January for additional income sources

If you don't meet the income threshold for MTD for Income Tax, you'll still need to complete your Self Assessment tax return as normal using the current system.

How does Self Assessment tax work currently?

The current Self Assessment system requires one annual tax return submission with different methods and deadlines:

Submission methods:

• HMRC online portal
• Paper forms by post
• Compatible software
• Through your accountant or bookkeeper

Key deadlines:

• 31 October: Paper submissions
• 31 January: Online submissions

Keep digital or paper records throughout the tax year. At the end of the year, compile them into one annual return.

How MTD for Income Tax will change Self Assessment

Making Tax Digital for Income Tax changes how you submit your tax information. You will send regular digital updates instead of one annual return.

What is changing:

• HMRC's online portal will be replaced by MTD-compatible software
• Paper filing will be replaced by digital submissions
• Annual-only reporting will be replaced by quarterly updates

New submission requirements:

• Four quarterly updates: Using MTD-compatible software throughout the tax year
• One final declaration: By 31 January for additional income sources
• Digital record-keeping: Maintain records in compatible software

What software do you need for MTD for Income Tax?

To comply with MTD for IT, you'll need to use software that's compatible with HMRC's systems. This software must be able to keep digital records and send your quarterly updates and final declaration directly to HMRC.

Cloud accounting software like Xero is MTD-compatible for keeping digital records and lets you submit quarterly updates and a final declaration directly to HMRC, all within the platform. Xero also connects to your bank account to automatically import transactions, and the Xero accounting app lets you reconcile transactions and attach receipts from your phone.

Are there any benefits to the changes in Self Assessment under MTD for IT?

Making Tax Digital for Income Tax offers several advantages:

Time savings:

• submit smaller, regular updates each quarter instead of one annual report
• let software automatically compile data from your digital records
• avoid manual calculations and spreadsheet-based tax preparation

Better financial management:

• Real-time tax estimates: HMRC provides ongoing tax liability estimates
• Earlier tax planning: Prepare for tax bills throughout the year
• Error correction: Fix mistakes in your next quarterly update

Improved business insights:

• Regular financial reviews: Quarterly reporting encourages consistent record-keeping
• Integrated business management: Platforms like Xero combine tax reporting with invoicing, receipt capture, and financial insights

HMRC reports that users of Making Tax Digital for VAT find the digital system makes tax compliance easier and more efficient.

Prepare for Self Assessment changes today

Cloud-based accounting software can help you get ready for the new system. Even if you're not required to comply with MTD for Income Tax yet based on your current income threshold, getting familiar with a digital system now will make the transition easier when the rules do apply. Find out how Xero can help you comply with Making Tax Digital for Income Tax.

FAQs on Self Assessment changes

Here are answers to some common questions about the upcoming changes to Self Assessment.

What happens if I have more than one business?

If you have more than one self-employed business or property, or are a sole trader and landlord, combine the income and expenses from all of them. Then, send one set of quarterly updates to HMRC for all your business activities. You'll only need to submit one final declaration that covers all income sources.

Can my accountant still file my taxes for me?

Yes, your accountant or bookkeeper can still manage your tax submissions. With MTD-compatible software like Xero, you can give your accountant access so they can review your records and submit updates to HMRC for you.

Do I need to keep paper receipts with MTD?

No, you don't need to keep paper receipts under Making Tax Digital for Income Tax. The rules require digital records, which means you can take photos of your receipts to create digital copies. Once you have a digital version stored securely, you can dispose of the paper receipt – the digital copy satisfies HMRC's record-keeping requirements.