Making Tax Digital — glossary & terms

The 12-month period over which a business reports its income and expenses. Under MTD ITSA, the standard accounting period follows the UK tax year: 6 April to 5 April. Some businesses may use a calendar year (1 April to 31 March) with approval.

Year-end adjustments made after all four quarterly updates have been submitted. These cover capital allowances, prepayments, accruals, and disallowable expenses — items not included in the quarterly figures.

An accountant or bookkeeper authorised by a taxpayer to submit MTD returns on their behalf using an HMRC Agent Services Account. Agents use agent-restricted credentials and can manage multiple clients under one login.

Business costs that can be deducted from income to reduce taxable profit. Examples include repairs, professional fees, advertising, and travel. Personal expenses and capital items are generally not allowable. Mortgage interest on rental properties is no longer an allowable expense under Section 24.

A capital allowance allowing businesses to deduct the full cost of qualifying plant and machinery in the year of purchase, up to a specified annual limit. Claimed via the year-end Adjustments & Allowances process, not in quarterly updates.

The period of accounts used to calculate tax for a given tax year. From 2024–25 onwards, all self-employed individuals use the tax year itself (6 April to 5 April) as their basis period — transitional rules applied in 2023–24.

MTD-compatible software that allows taxpayers to maintain records in a spreadsheet or other non-compliant format and then import and submit those figures to HMRC via the official API. ArcTax supports bridging via CSV upload.

An HMRC API used to submit year-end accounting adjustments to a business income source before triggering a Final Declaration tax calculation. Covers adjustments like capital allowances and basis period differences.

Trading or property losses from earlier tax years that have not yet been relieved. Under MTD, these are declared at the Final Declaration stage and applied to reduce the current year's taxable profit.

An optional quarterly reporting period that runs from 1 April to 31 March, rather than the standard 6 April to 5 April fiscal year. Useful for businesses whose accounting already follows the calendar year.

Tax reliefs on the purchase of business assets such as equipment, vehicles, and machinery. They replace the accounting concept of depreciation for tax purposes. Claimed at year end, not through quarterly updates.

A scheme under which contractors deduct money from subcontractors' payments and pass it to HMRC as an advance payment towards the subcontractor's tax and National Insurance. CIS deductions are declared in the Final Declaration under Additional Information.

Under MTD ITSA, quarterly updates are cumulative — each update reports income and expenses from the start of the tax year to the end of that quarter, not just for that quarter alone. This means a Q2 update includes Q1 figures as well.

HMRC requires all MTD taxpayers to keep their income and expenses in a digital format throughout the tax year. A spreadsheet qualifies as digital record-keeping. Paper records and mental records do not comply with MTD.

Costs that appear in a business's accounts but cannot be deducted for tax purposes. Common examples include personal use of a business asset, client entertainment, and fines. These are included in bookkeeping totals but reversed out in the tax calculation.

A declaration made at the end of the tax year for each income source, confirming that the quarterly updates are complete and accurate. The EOPS is submitted before the Final Declaration.

The actual percentage of income paid as tax after all allowances, reliefs, and deductions. Different from the marginal rate, which is the rate applied to the last pound of income earned.

The year-end submission that replaces the traditional Self Assessment SA100 return under MTD ITSA. It confirms all income sources, including non-business income (employment, dividends, interest), applies reliefs, and calculates the final tax liability. The deadline is 31 January following the end of the tax year.

Rental income received from property outside the UK. UK residents with overseas property must declare this income under MTD ITSA via the Foreign Property income source (SA106). Quarterly updates are submitted separately from UK property.

A mandatory set of technical identifiers that must be included in every API call made to HMRC. They capture browser, device, and network metadata to help HMRC detect fraudulent submissions. Failure to include them causes API rejection. These are handled automatically by compliant MTD software.

HMRC's online identity system. Taxpayers use a Government Gateway User ID and password to log in to HMRC services and to authorise MTD software via OAuth 2.0. Each individual has a unique Government Gateway ID linked to their National Insurance number.

Total income before any expenses or deductions. MTD ITSA qualifying thresholds (£50,000, £30,000, £20,000) are based on gross income from self-employment and property — not net profit.

The UK government department responsible for collecting taxes, enforcing tax law, and administering benefits. HMRC operates the MTD APIs and the Government Gateway identity platform.

A taxpayer whose total taxable income falls between £50,271 and £125,140 in 2025–26, paying income tax at 40% on the portion above the basic rate limit. Higher rate taxpayers are significantly affected by Section 24 mortgage interest relief changes.

A tax on personal income including earnings from employment, self-employment, property, savings, and investments. Under MTD ITSA, sole traders and landlords report their business income quarterly and pay income tax via the Final Declaration.

An estimated tax liability calculated by HMRC at any point during the tax year based on quarterly updates submitted so far. Not a final bill — it is a forecast to help taxpayers plan ahead. Triggered on demand via the Individuals Calculations API.

An individual who receives rental income from one or more properties. Under MTD ITSA, landlords with qualifying income above the relevant threshold must submit quarterly updates for UK and/or foreign property income and file a Final Declaration.

A mechanism to reduce tax liability by applying business or property losses against other income. Losses can be carried forward to future years (sideways relief against the same trade) or in some cases set against other income in the same year.

HMRC's initiative to digitalise the UK tax system. Taxpayers must keep digital records and submit updates to HMRC using approved software. MTD for VAT launched in 2019. MTD for Income Tax Self Assessment (MTD ITSA) launches from April 2026.

Making Tax Digital for Income Tax Self Assessment. The specific MTD programme affecting sole traders and landlords. Requires quarterly digital updates and a Final Declaration each tax year, replacing the traditional annual SA100 Self Assessment return.

Software approved by HMRC to connect to its MTD APIs and submit tax data on behalf of taxpayers. Cannot be substituted with HMRC's own online portal for MTD submissions. Must include mandatory fraud prevention headers on all API calls.

Contributions paid by employees, employers, and self-employed individuals to fund state benefits and the NHS. Class 2 and Class 4 NI applies to sole traders. Declared alongside income tax but not currently part of the quarterly MTD update — it is settled at Final Declaration.

A unique identifier assigned to every UK taxpayer. Takes the format AA999999A. Used to identify taxpayers in HMRC's MTD APIs. Your software uses your NINO to link quarterly updates to your HMRC tax record.

The industry-standard authorisation protocol used by HMRC to allow MTD software to access a taxpayer's data. When you connect ArcTax to HMRC, you log in directly to the Government Gateway — the software never sees your password. HMRC issues a secure access token to the software instead.

Quarterly submission windows and year-end deadlines that HMRC expects to be fulfilled. Retrieved live from HMRC's Obligations API by your MTD software. Each obligation shows the period dates, due date, and current status (Open or Fulfilled).

The amount of income you can earn before paying income tax. For 2025–26, this is £12,570. The personal allowance tapers by £1 for every £2 of income above £100,000 and is fully withdrawn at £125,140.

HMRC's new system for penalising late MTD submissions. Each missed quarterly update earns one penalty point. When points reach the threshold (4 for quarterly filers), a £200 fixed penalty is issued. Further missed deadlines add additional £200 penalties.

The dates that define a business's accounting year for a given income source. Required to be submitted to HMRC for each self-employment source before an Intent to Finalise calculation can be triggered. Missing this causes error C55326.

For MTD ITSA purposes, qualifying income is the combined gross income from self-employment and UK/foreign property rental. PAYE salary, pensions, dividends, and bank interest do not count towards the threshold.

A digital submission made to HMRC once per quarter, reporting income and expenses from the start of the tax year to the end of that quarter. There are four per year. A quarterly update does not trigger a tax payment — it is a reporting obligation only.

The Self Employment supplementary pages of the SA100 tax return. Under MTD ITSA, the figures that would appear on SA103 are submitted quarterly via the Self Employment income source in your MTD software.

The UK Property supplementary pages of the SA100 tax return. Under MTD ITSA, these figures are submitted quarterly via the UK Property income source.

The Foreign income supplementary pages. Under MTD ITSA, overseas rental income is submitted via the Foreign Property income source using equivalent SA106 categories.

The tax rule that removed the ability for residential landlords to deduct mortgage interest from rental income as an expense. Since April 2020, landlords instead receive a 20% tax credit on mortgage interest paid — regardless of their tax band. This significantly increased the tax burden on higher-rate landlord taxpayers.

HMRC's existing annual tax return system, which MTD ITSA will eventually replace for qualifying taxpayers. Under Self Assessment, income is reported once per year by 31 January via the SA100 return. MTD replaces this with quarterly updates plus a Final Declaration.

An individual who runs a business on their own account, taxed as self-employed. Sole traders are a primary target group for MTD ITSA and must submit quarterly self-employment income updates using approved software once their income exceeds the qualifying threshold.

The UK tax year runs from 6 April to 5 April the following year. For example, the 2025–26 tax year runs from 6 April 2025 to 5 April 2026. MTD obligations, thresholds, and deadlines are all assessed on a per-tax-year basis.

The total income received by a business before deducting any expenses. Also referred to as gross income or gross receipts. MTD qualifying thresholds are based on turnover, not profit.

The quarter for which a quarterly update is submitted. Under the standard fiscal year, update periods are Q1 (6 Apr–5 Jul), Q2 (6 Jul–5 Oct), Q3 (6 Oct–5 Jan), and Q4 (6 Jan–5 Apr). Calendar period variants run 1 Apr–31 Mar.

Value Added Tax — a consumption tax charged on most goods and services. MTD for VAT was the first phase of Making Tax Digital, launched in 2019 for VAT-registered businesses. MTD for Income Tax (MTD ITSA) is a separate programme affecting sole traders and landlords.