VAT Returns and Self Assessment: Understanding MTD ITSA in the UK

VAT Returns vs MTD ITSA: What Is the Difference?

One of the most common sources of confusion is assuming that MTD for VAT and MTD for Income Tax Self Assessment are the same requirement. They are not.

MTD for VAT applies to VAT-registered businesses and requires digital VAT records and VAT Return submissions through compatible software. HMRC states that VAT Returns must normally be submitted using software compatible with Making Tax Digital.

MTD ITSA, on the other hand, is the Making Tax Digital system for Income Tax. It applies to qualifying sole traders and landlords based on their qualifying income and requires digital records, quarterly updates and a year-end tax return.

The two systems can apply to the same person. For example, a VAT-registered sole trader may need to comply with MTD for VAT while also being required to use MTD ITSA for Income Tax.

What Is a VAT Return?

A VAT Return tells HMRC how much VAT a VAT-registered business has charged and how much VAT it has paid to other businesses. Most VAT-registered businesses submit VAT Returns every three months, although the exact accounting period depends on the business’s VAT arrangements.

HMRC states that the normal online VAT Return deadline is usually one calendar month and seven days after the end of the accounting period.

Businesses using MTD for VAT generally need to keep VAT records digitally and submit their VAT Returns using compatible software.

For more information about VAT filing, see our guide to filing a VAT Return online .

What Is MTD ITSA?

Making Tax Digital for Income Tax Self Assessment, commonly called MTD ITSA, is HMRC’s digital approach to Income Tax reporting for qualifying sole traders and landlords.

Under MTD ITSA, qualifying taxpayers need to keep digital records of their self-employment and/or property income and expenses and send quarterly updates to HMRC using compatible software.

HMRC describes quarterly updates as summaries of income and expenses rather than tax returns. The software totals the relevant information from the taxpayer’s digital records before the update is sent to HMRC.

You can read our more detailed MTD ITSA Guide 2026 for a deeper explanation of the rules and reporting process.

Who Needs to Use MTD ITSA?

MTD ITSA is being introduced in stages. HMRC’s current rules set different qualifying income levels for different tax years.

HMRC’s official guidance confirms that the first phase applies from April 2026 to relevant individuals whose qualifying income is above £50,000. Later phases apply to income above £30,000 and £20,000 respectively.

If you are unsure whether you fall within MTD ITSA, review the official HMRC MTD for Income Tax guidance before making a decision.

Digital Records and Digital Links for MTD ITSA

Digital record keeping is one of the central requirements of MTD ITSA. Qualifying taxpayers need to create and store digital records of their self-employment and property income and expenses.

Each digital record generally needs information such as the amount, transaction date and appropriate category.

HMRC also explains that where more than one software product is used, the relevant records need to be digitally linked. Manual copying and pasting between systems is not an acceptable digital link for records covered by the rules.

If your business currently relies heavily on spreadsheets, this is an important area to review before your first MTD ITSA submission.

You can also read our guide to digital records and digital links for spreadsheet workflows if you want to understand how spreadsheet-based processes can fit into digital tax reporting.

How MTD ITSA Quarterly Updates Work

Under MTD ITSA, qualifying taxpayers need to send quarterly updates to HMRC for each relevant source of self-employment or property income.

A quarterly update is not the same thing as a traditional Self Assessment tax return. Instead, it provides HMRC with totals for the relevant income and expense categories from the taxpayer’s digital records.

HMRC confirms that each quarterly update covers the relevant period from the start of the tax year or applicable accounting period through to the end of the update period.

Standard Quarterly Update Periods

These are the standard periods for taxpayers whose accounting period aligns with the tax year. Different arrangements can apply where calendar update periods are used.

See the official HMRC quarterly updates guidance for the latest rules and deadlines.

MTD ITSA Deadlines for UK Taxpayers

Keeping track of deadlines is essential because MTD ITSA introduces several reporting points throughout the tax year.

HMRC’s guidance should always be checked for your specific accounting period and circumstances because reporting periods can differ.

What Happens to Self Assessment Under MTD ITSA?

MTD ITSA changes the way qualifying taxpayers report their business and property income, but it does not simply mean that the annual tax process disappears.

During the year, taxpayers send quarterly updates. After the tax year, they need to finalise their information, make the required adjustments, include other relevant income and gains, and submit their tax return through compatible MTD software.

HMRC confirms that the tax return must normally be submitted by 31 January following the end of the relevant tax year.

This means that MTD ITSA is better understood as a more frequent, digital reporting process rather than simply replacing Self Assessment with four separate tax returns.

For more information, see our Self Assessment tax return guide .

If You Are VAT Registered and Self-Employed

A UK sole trader can have both VAT and Income Tax obligations. If you are VAT registered and also fall within MTD ITSA, you need to understand that you may have two separate digital reporting processes.

The same underlying business transactions may contribute to both VAT and Income Tax reporting, but the information required and the reporting rules are different.

This is why choosing a workflow that can handle spreadsheet data, digital records and HMRC submissions can be useful for businesses managing both obligations.

Choosing MTD-Compatible Software

Compatible software is central to both MTD for VAT and MTD ITSA. However, you should select software based on the tax obligations and workflow you actually need to manage.

If you already maintain business records in spreadsheets, bridging software can provide a way to connect spreadsheet-based records with HMRC-compatible filing processes.

11 MTD Bridge provides MTD filing workflows for VAT and Income Tax, including spreadsheet-based processes and HMRC submission functionality.

For accountants and tax agents, the platform also provides dedicated workflows for managing client filings. See the MTD Income Tax Self Assessment guide for agents for more information.

You should also verify software compatibility using HMRC’s official software information before choosing a product.

Common MTD ITSA Mistakes to Avoid

1. Treating quarterly updates as tax returns

Quarterly updates are summaries of income and expenses. They are not simply four separate annual Self Assessment returns.

2. Waiting until the deadline to organise records

MTD ITSA is designed around digital record keeping throughout the year. Leaving everything until the deadline can make checking and correcting records more difficult.

3. Manually copying information between systems

Where digital linking rules apply, businesses should use an appropriate digital connection rather than manually moving records between software.

4. Confusing VAT reporting with Income Tax reporting

VAT and Income Tax have different reporting requirements. A VAT Return does not replace an MTD ITSA quarterly update, and an MTD ITSA update does not replace a VAT Return.

5. Using outdated HMRC information

MTD rules are being introduced in phases and HMRC guidance is updated regularly. Always check the latest GOV.UK guidance before relying on a deadline, threshold or penalty rule.

MTD ITSA Preparation Checklist

If you expect to fall within MTD ITSA, use this checklist to prepare:

• Check whether your qualifying income brings you into MTD ITSA.
• Identify all relevant self-employment and property income sources.
• Choose MTD-compatible software.
• Set up your digital record-keeping process.
• Review your income and expense categories.
• Check how different software systems will be digitally linked.
• Connect and authorise your software with HMRC where required.
• Understand your quarterly update periods.
• Keep track of quarterly submission deadlines.
• Review records regularly and correct errors promptly.
• Prepare for the year-end tax return and final reporting.

Preparing early can make the transition easier, particularly for businesses that currently rely on spreadsheets or a mixture of accounting tools.

Frequently Asked Questions About VAT Returns and MTD ITSA

Final Thoughts

VAT Returns and Self Assessment are becoming increasingly digital, but they should not be confused with one another. MTD for VAT focuses on digital VAT records and VAT Return submissions, while MTD ITSA introduces digital Income Tax records, quarterly updates and year-end reporting for qualifying sole traders and landlords.

For UK businesses and self-employed individuals, the most important step is to understand which obligations apply to you and then build a reliable digital record-keeping and filing process around them.

If you already work with Excel or another spreadsheet-based system, an MTD-compatible bridging workflow may help you continue using your existing records while connecting them to HMRC submission processes.

Explore 11 MTD Bridge to learn more about VAT and MTD Income Tax filing workflows.

Official HMRC Resources

• GOV.UK – Making Tax Digital for Income Tax
• GOV.UK – Send quarterly updates
• GOV.UK – Create digital records
• GOV.UK – Submit your MTD Income Tax return
• GOV.UK – Sending a VAT Return
• GOV.UK – How to send a VAT Return
• GOV.UK – VAT Notice 700/22: Making Tax Digital for VAT

Editorial note: This article is intended for general information about UK tax and Making Tax Digital requirements. HMRC rules and guidance can change. Always check the latest GOV.UK guidance or speak to a qualified tax professional about your individual circumstances.