MTD vs Self Assessment: What's the Difference?
If you are self-employed or a landlord, you have been filing Self Assessment tax returns for years — possibly decades. Now Making Tax Digital for Income Tax has arrived, and the natural question is: what actually changes?
The short answer is that MTD does not eliminate Self Assessment entirely. It changes how and when you report your income and expenses to HMRC, but the underlying tax calculations remain the same. This article breaks down the differences clearly so you know exactly what to expect.
Self Assessment: How It Works Now
Under the traditional Self Assessment system, the process is straightforward (if not always enjoyable):
- The tax year runs from 6 April to 5 April
- You keep records of your income and expenses throughout the year
- After the tax year ends, you (or your accountant) complete a Self Assessment tax return
- The return is submitted to HMRC by 31 January following the end of the tax year (or 31 October for paper returns)
- You pay any tax owed by 31 January (with a possible second payment on account by 31 July)
The key characteristic of Self Assessment is that it is annual. You report everything once, after the year is over. Many people leave it until December or January, gathering their records and calculating their figures in one concentrated effort.
MTD for Income Tax: What Changes
Making Tax Digital keeps the same tax year (6 April to 5 April) and the same tax rules. Your tax liability is calculated the same way. What changes is the reporting process:
1. Quarterly Updates Replace Annual Reporting
Instead of one annual return, you submit four quarterly updates during the tax year:
| Quarter | Period | Deadline |
|---|---|---|
| Q1 | 6 April – 5 July | 7 August |
| Q2 | 6 July – 5 October | 7 November |
| Q3 | 6 October – 5 January | 7 February |
| Q4 | 6 January – 5 April | 7 May |
Each quarterly update is a summary of your income and expenses for that quarter, submitted through your MTD software directly to HMRC.
2. End of Period Statement
After your four quarterly updates, you submit an End of Period Statement (EOPS). This finalises your business income for the year, allowing you to make any adjustments — for example, accounting for stock at the year end or adjusting for private use of business assets.
3. Final Declaration Replaces the Tax Return
The Final Declaration replaces the traditional Self Assessment tax return. It confirms your total tax position for the year, including all income sources (not just self-employment and property). The deadline is 31 January following the end of the tax year — the same deadline as the current Self Assessment return.
For a step-by-step walkthrough of the quarterly process, see our guide to submitting quarterly updates.
Side-by-Side Comparison
| Feature | Self Assessment | MTD for Income Tax |
|---|---|---|
| Reporting frequency | Annual | Quarterly + annual |
| Record keeping | Can be paper-based | Must be digital |
| Submission method | HMRC online portal or paper | MTD-compatible software only |
| Filing deadline | 31 January | Quarterly + 31 January final |
| Tax calculation | Same | Same |
| Payment dates | Same | Same |
| Penalty system | Late filing penalties | Points-based penalty system |
What Stays the Same
Several important things do not change under MTD:
Tax Rates and Allowances
Your income tax rates, personal allowance, National Insurance contributions, and all other tax calculations are identical. MTD is a reporting change, not a tax change. You will not pay more or less tax because of MTD.
Payment Dates
The dates you pay your tax remain the same. Payments on account are still due on 31 January and 31 July. The quarterly updates are reporting obligations, not payment obligations — you do not pay tax four times a year.
Allowable Expenses
The same expenses that are deductible under Self Assessment are deductible under MTD. There are no new restrictions and no new allowances. The rules about what you can and cannot claim are unchanged.
The Tax Year
The tax year still runs from 6 April to 5 April. Despite discussions about aligning the tax year with the calendar year, this has not changed for MTD.
What Is Genuinely Different
Digital Record Keeping Is Mandatory
Under Self Assessment, you could technically keep paper records — a notebook of income, a folder of receipts — and type the totals into your tax return at the end of the year. Under MTD, your records must be digital from the point of entry. You need HMRC-compatible software, and you need to record transactions in it throughout the year.
Software Is Required
You can currently file a Self Assessment return through HMRC's own online portal at no cost. Under MTD, you must use third-party MTD-compatible software to submit your quarterly updates and Final Declaration. HMRC's basic tools have limited MTD functionality. For a look at what HMRC provides for free, see our article on free MTD software from HMRC.
More Frequent Reporting
The biggest practical change is moving from one annual submission to four quarterly updates plus an annual declaration. This means staying on top of your records throughout the year rather than doing everything in January.
For some people this is actually an improvement — it forces regular record keeping and provides a clearer picture of your tax position. For others, it feels like more bureaucracy. Either way, it is the new reality.
A New Penalty System
MTD introduces a points-based penalty system for late submissions. Each late quarterly update earns a penalty point. Once you accumulate enough points (the threshold varies), you receive a £200 fine for each subsequent late submission. This replaces the fixed £100 late filing penalty under Self Assessment.
The new system is arguably fairer — one late submission does not immediately result in a fine. But it means you need to be consistent across all four quarters, not just the annual return.
Do You Still File a Self Assessment Return?
This depends on your income sources. The Final Declaration under MTD replaces the Self Assessment tax return for your self-employment and property income. However, if you have other income that is not covered by MTD (such as capital gains, foreign income, or certain investment income), you may still need to report those through the Final Declaration process.
In practice, for most sole traders and landlords, the Final Declaration covers everything that the Self Assessment return previously covered. Your MTD software should guide you through this.
Which Is Better?
Neither system is inherently better — they serve the same purpose with different mechanics. However, there are practical advantages to the MTD approach:
- Fewer surprises — seeing your tax position quarterly means you are less likely to face an unexpected large bill in January
- Better records — the discipline of digital record keeping throughout the year leads to more accurate figures
- Less year-end stress — if you have kept your records up to date, the Final Declaration is largely a confirmation exercise rather than a scramble to gather a year's worth of data
The main disadvantage is the overhead of quarterly submissions — four deadlines instead of one, and the need for software.
Getting Started With MTD
If you are transitioning from Self Assessment to MTD, the adjustment is mainly about changing your habits. Instead of one annual push, you maintain your records regularly and submit four times a year. The tax rules, the amounts, and the payment dates remain familiar.
ClearMTD is designed to make this transition as painless as possible. It handles the quarterly submissions, End of Period Statements, and Final Declaration — everything you need, without the complexity of a full accounting platform.
Start your free ClearMTD account and see how straightforward the switch from Self Assessment to MTD can be.
Related Reading
- What is Making Tax Digital? — complete guide for beginners
- HMRC quarterly reporting: how it works — the quarterly update process explained
- MTD End of Period Statement explained — what happens after your quarterly updates
Frequently Asked Questions
Do I still need to register for Self Assessment?
Yes. MTD for Income Tax builds on the Self Assessment system. You need a Unique Taxpayer Reference (UTR) and must be registered for Self Assessment before you can sign up for MTD.
Will I pay more tax under MTD?
No. MTD does not change how your tax is calculated or what rates apply. It only changes how and when you report your income and expenses.
Can I still file a paper tax return?
If you are mandated for MTD, no. You must use MTD-compatible software for your quarterly updates and Final Declaration. Paper returns are not an option for those within MTD scope.
What if I have both employed and self-employed income?
Your employed income is handled through PAYE as normal. MTD applies to your self-employed and/or property income. The Final Declaration brings everything together to calculate your total tax position.
Is MTD just Self Assessment but more often?
In essence, yes — though the mechanism is different. The quarterly updates are simpler summaries (income and expenses totals), not full tax returns. The detailed calculation happens at the Final Declaration stage. Think of it as regular check-ins rather than four full returns.