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MTD for ITSA: Common Mistakes Practices are Making Already

MTD for Income Tax Self Assessment

Making Tax Digital for Income Tax (MTD for ITSA) went live in April 2026. For many practices, the theory has been well understood for some time. The reality of implementation is proving more complicated. This article sets out the most common errors we are already seeing and what practices can do to address them.

What does MTD for ITSA require of practices?

MTD for ITSA requires self-employed individuals and landlords with qualifying income above £50,000 to keep digital records and submit quarterly updates to HMRC, followed by a final declaration. From April 2026, the regime is live for this first tier of taxpayers, with the £30,000 threshold following in April 2027.

For accounting practices, this means a substantial increase in submission volume, tighter turnaround windows, and a higher dependency on client data quality. Those who treated MTD for ITSA as a future problem are now facing it as a present one.

What are the most common MTD for ITSA mistakes practices are making?

Based on early implementation experience, the following errors are appearing with notable frequency:

Incorrect quarterly period assignments

Practices are submitting updates against the wrong quarterly period, particularly where clients have non-standard accounting dates. HMRC’s system does not always flag this in real time, creating a compliance gap that surfaces only at year-end.

Incomplete client categorisation

Not all qualifying clients have been identified and enrolled. Income from property is frequently missed, particularly where landlord income sits below the radar of the practice’s standard review process.

Software mismatches and integration gaps

Some practices are running bridging software that does not fully meet HMRC’s digital records requirements. Others have clients using incompatible software that creates manual intervention every quarter.

Over-reliance on client self-reporting

Quarterly submissions are only as accurate as the data coming in. Practices that have not established structured data-collection workflows for MTD clients are finding that quarter-end becomes a crisis point rather than a routine task.

Inadequate staff training on MTD for Income Tax workflows

The shift from annual to quarterly touchpoints requires a different operating rhythm. Practices that have not retrained staff or restructured their workflow calendar are absorbing the capacity hit at the expense of other client work.

Why is MTD for ITSA more operationally demanding than MTD for VAT?

MTD for VAT gave practices a useful precedent, but MTD for ITSA is a more complex regime. The client base is broader and more varied; income types are more diverse; and the final declaration process introduces a layer of complexity that VAT submissions do not carry. Practices that assumed their MTD for VAT experience would translate directly are finding the adjustment steeper than anticipated.

What is the penalty position for MTD for ITSA errors?

HMRC is operating a soft-landing approach for the first year, but this does not extend indefinitely. Practices should treat the current period as the window to embed correct processes and not as permission to defer compliance. Point-based penalties for late or inaccurate submissions will apply once the soft-landing period closes.

Read how HMRC Making Tax Digital is transforming tax compliance in the UK.

How can practices reduce MTD for Income Tax Self-Assessment compliance risk right now?

The practices managing MTD for ITSA most effectively share three characteristics. They have a complete and accurately categorised client register for MTD ITSA. They have standardised the data-collection process so that quarterly submissions are driven by workflow, not by chasing. And they have the capacity to handle increased submission volume without it creating a bottleneck elsewhere in the practice.

For many practices, the capacity piece is the hardest to solve internally. Recruiting and retaining qualified staff remains a structural challenge across the UK accounting sector. Outsourcing the preparation and submission elements of MTD for ITSA work to a partner with established digital workflows and HMRC-compliant processes is an increasingly practical solution.

Know more about how Befree helps firms navigate the Making Tax Digital challenge.

Befree supports UK accounting practices with outsourced compliance and tax processing services, including MTD for ITSA workflow management. If your practice is managing increased submission volumes or needs to build capacity ahead of the April 2027 threshold expansion, speak to us about how we can support your team.