Making Tax Digital for UK Expats: Deadlines, Penalties, and Prep
Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) replaces the UK’s annual Self Assessment return with quarterly digital reporting to HMRC, requiring self-employed individuals and landlords with gross income above £50,000 to keep digital records and submit income and expense summaries four times per year using HMRC-approved software. The system launched in April 2026, with the income threshold dropping to £30,000 in April 2027 and £20,000 in April 2028. Most U.S. expats who filed the SA109 supplementary page in their 2024/25 UK Self Assessment are automatically exempt for the 2026/27 tax year, giving you time to prepare before the requirement takes full effect.
Who needs to know about MTD for ITSA right now:
- Anyone filing UK Self Assessment as a self-employed person or property landlord
- U.S. expats with UK income above the current £50,000 threshold
- Expats holding an exemption who need to plan for the requirement’s end
- Anyone considering UK self-employment or property investment
Dealing With MTD and U.S. Filing at the Same Time?
Below, we cover who qualifies, what changes in practice are required, available exemptions, how MTD interacts with your U.S. return, and how to prepare step by step.
Who Has to Sign Up for Making Tax Digital in the UK?
MTD for ITSA is rolling out in phases based on your total gross income from self-employment and/or UK or overseas property. HMRC uses the figures from your most recent Self Assessment return to determine which phase you fall into.
| Total Gross Income (Self-Employment and/or Property) | MTD Start Date |
|---|---|
| Over £50,000 | April 2026 |
| £30,000 to £50,000 | April 2027 |
| £20,000 to £30,000 | April 2028 |
A few important notes about eligibility:
- Income that counts: only self-employment receipts and property income (UK or overseas) are included. Employment wages, pensions, and investment returns do not count toward the threshold.
- Partnerships are excluded: general partnerships, limited partnerships, and LLPs have been deferred from MTD for ITSA indefinitely. HMRC has not set a mandation date and has stated that further consultation will take place before any decision is made.
- U.S. expats and non-resident landlords are not automatically excluded based on residency alone: if your gross UK property or self-employment income exceeds the threshold, MTD applies regardless of where you live. However, most U.S. expats and non-resident landlords will qualify for the automatic temporary exemption through their SA109 filing until April 2027 (see the exemptions section below).
What Changes Under Making Tax Digital for Income Tax?
If MTD applies to you, the traditional once-a-year Self Assessment return is replaced by a series of smaller, more frequent digital submissions. Here is what the new cycle looks like:
- Digital record keeping: you must maintain digital records of all income and allowable expenses using MTD-compliant software. Spreadsheets are permitted for record keeping, but they must be digitally linked to your MTD software so that data transfers without manual re-entry.
- Quarterly updates: you will submit income and expense summaries to HMRC four times per year, by the 7th of the month following each quarter (see table below).
- End of Period Statement (EOPS): After the final quarter, you file a statement summarizing your full-year figures.
- Final Declaration: This replaces the traditional Self Assessment return. It confirms your total income and tax liability for the year, and it is where you make any final adjustments.
| Quarter | Period | Deadline |
|---|---|---|
| Q1 | April 6 to July 5 | August 7 |
| Q2 | July 6 to October 5 | November 7 |
| Q3 | October 6 to January 5 | February 7 |
| Q4 | January 6 to April 5 | May 7 |
Can You Get an Exemption from MTD for ITSA?
Yes, in some cases. HMRC offers both permanent and temporary exemptions.
Automatic Temporary Exemptions (Until April 2027)
If your 2024/25 Self Assessment return includes the SA109 supplementary page – or any of the conditions below – you automatically qualify for a temporary exemption from MTD for ITSA until April 2027. No application is needed.
The SA109 is the HMRC supplementary page that covers residence status, domicile, the Foreign Income and Gains (FIG) regime, remittance basis claims, and treaty relief. If you are a U.S. citizen or green card holder filing a UK Self Assessment, you almost certainly file SA109. HMRC confirmed this automatic exemption in updated guidance published in April 2026.
The full list of automatic exemptions:
- SA109 filers: entries on the residence and remittance supplementary pages relating to non-residence, split year, dual residence, the FIG regime, or claims for personal allowances under a double tax treaty
- Trust or estate income reported on the trust supplementary pages
- Claims for business investment relief or remittances of nominated income
- Claims for averaging relief (farmers and creative artists)
- Non-resident performer income
- Foster care income
What if you did not file SA109 in 2024/25?
If you did not include SA109 in your 2024/25 return but reasonably expect to include it in your 2025/26 or 2026/27 return, you can apply to HMRC for the same temporary exemption. The application process is available on GOV.UK. Do not assume the automatic exemption applies if you skipped SA109 last year.
This is a deferral, not a permanent exemption. HMRC has not yet confirmed what happens to SA109 filers after April 2027. The broader MTD income threshold drops to £30,000 in April 2027, and HMRC is expected to publish further guidance before that date.
Digital Exclusion Exemptions
You can apply for a permanent exemption if using digital tools is not reasonable or practical due to age, disability, location, or religious grounds.
How You Will Be Notified
After you submit your 2024/25 Self Assessment return (due by January 31, 2026), HMRC reviews your income. If you meet the threshold and do not qualify for an exemption, they will send you a letter confirming your enrollment in MTD. If you receive this letter, there is no need to worry. It is simply a notification that you will begin filing under the new system for your next tax year.
What Are the Penalties for Missing MTD Deadlines?
HMRC is introducing a new points-based penalty system for late MTD for ITSA submissions. This replaces the previous automatic fines and is designed to be more proportionate.
Late Submission Penalties
Each time you miss a quarterly update or filing deadline, you receive one penalty point. Once you accumulate four points, you are charged a £200 fine. Additional missed deadlines after that trigger further penalties.
Penalty points remain on your record for two years before they expire, and you can appeal a point if you have a reasonable excuse for the late submission.
Soft Landing for the First Year
For the first cohort joining in April 2026, HMRC has confirmed a “soft landing.” No penalty points will be charged for late quarterly updates during the 2026/27 tax year. This gives you a full year to get comfortable with the new system before penalties kick in. This soft landing applies only to the first cohort and is not expected to extend to taxpayers joining in April 2027 or April 2028.
Late Payment Penalties
Separate from submission penalties, late payment charges also apply:
- Within 15 days: No penalty
- 16 to 30 days late: An initial penalty on the outstanding tax
- 31+ days late: Additional charges plus an annual interest rate on the unpaid amount, charged daily
The best way to avoid both types of penalties is to stay on top of your quarterly schedule and pay any tax owed promptly.
Do I Need New Software for Making Tax Digital?
Yes, the HMRC portal does not support MTD submissions. You will need MTD-compliant software that can:
- Connect directly to HMRC’s systems through their API
- Maintain digital records of your income and expenses
- Submit quarterly updates, your End of Period Statement, and Final Declaration
HMRC maintains a list of recognized MTD-compatible software on GOV.UK. When choosing software, look for a solution that handles the quarterly reporting cycle and integrates well with how you already track your finances.
If you use spreadsheets for day-to-day bookkeeping, that is still allowed, but the spreadsheet must be digitally linked to your MTD-compliant software so the data flows without manual copying or re-entry.
How Does MTD Affect Your U.S. Tax Obligations?
MTD is a UK-side requirement, but if you are a U.S. citizen or green card holder, you are also required to file a U.S. tax return reporting your worldwide income. Here is where the two systems intersect:
- Self-employment income: if you are self-employed in the UK and subject to MTD, you will also need to report that income on your U.S. return. The Foreign Earned Income Exclusion can help reduce your U.S. tax liability, and the Foreign Tax Credit may offset taxes you have already paid to HMRC.
- Rental income from UK or overseas property that triggers MTD must also be reported to the IRS. Proper use of credits and deductions can prevent double taxation.
- Record keeping: the digital records you maintain for MTD can also simplify your U.S. filing. Having organized quarterly income and expense data makes it much easier to prepare your American return.
Example: Say you are a freelance consultant in London earning £65,000 per year in self-employment income. On the UK side, you are in the first MTD cohort and must submit quarterly updates to HMRC. On the U.S. side, that same income converts to roughly $82,000 and must be reported on your Form 1040. You could use the Foreign Earned Income Exclusion to exclude up to $130,000 of qualifying earned income, which would eliminate your U.S. tax on that amount entirely. Alternatively, if you pay UK income tax at the 40% higher rate on a portion of your earnings, the Foreign Tax Credit may give you a larger overall benefit by offsetting your U.S. liability dollar for dollar against taxes already paid to HMRC.
Managing tax obligations in two countries takes careful coordination. Working with a tax team that handles both U.S. and UK filings can save you time and help you avoid costly mistakes.
You’re an American in the UK. You Shouldn’t Have to Figure This Out Alone.
Preparing for Making Tax Digital
If MTD applies to you, or will soon, here are the steps to take now:
- Confirm your status: check whether your gross self-employment and/or property income puts you in the April 2026, 2027, or 2028 cohort. Review your most recent Self Assessment return to see where you stand.
- Choose your software: browse HMRC’s compatible software list and select a tool that fits your needs. Set it up before your first quarterly deadline, so you have time to get comfortable.
- Start keeping digital records: even if your start date is not until 2027 or 2028, building the habit of digital bookkeeping now will make the transition seamless.
- Map out your quarterly calendar: note the submission deadlines (August 7, November 7, February 7, and May 7) and build them into your schedule alongside your U.S. tax deadlines.
- Coordinate with your tax advisor: if you are filing in both the U.S. and the UK, make sure your advisor understands both systems. The records you keep for MTD can feed directly into your U.S. return preparation.
FAQs About Making Tax Digital for Expats
Yes, MTD for ITSA applies based on income, not residency. Self-employed individuals and landlords with gross UK income above £50,000 must comply from April 2026, regardless of where they live. However, most U.S. citizens filing a UK Self Assessment automatically qualify for the SA109 exemption, which defers MTD until at least April 2027. If your 2024/25 return included the SA109 page, no application is needed.
No, U.S. employment income does not count. HMRC only includes gross receipts from self-employment and property income (UK or overseas) when calculating your MTD threshold. Employment wages, pensions, dividends, and investment returns are all excluded.
No, you cannot opt out if your qualifying income meets the threshold. MTD for ITSA is mandatory for self-employed individuals and landlords above the income threshold, with two exceptions: the automatic SA109 exemption for taxpayers with non-residence, treaty claims, or Foreign Income and Gains entries on their 2024/25 Self Assessment, and permanent digital exclusion exemptions for those unable to use digital tools. If you filed SA109 in your 2024/25 return, your exemption until April 2027 is automatic and requires no application.
For the 2026/27 tax year, nothing. HMRC has confirmed a soft landing where no penalty points will be charged for late quarterly updates during the first year. From the 2027/28 tax year onward, each missed deadline adds one penalty point to your record. Once you reach four points, you receive a £200 fine, and each additional missed deadline triggers further penalties. Points expire after two years.
The digital records you keep for HMRC can double as documentation for your U.S. return. Your quarterly income and expense data feeds directly into Form 1040 preparation, and the Foreign Earned Income Exclusion or Foreign Tax Credit can help prevent double taxation on the same income. Working with a tax team experienced in both U.S. and UK obligations helps ensure nothing falls through the cracks. Learn more in our U.S. expat tax guide for the UK.
Yes, if you included the SA109 in your 2024/25 UK Self Assessment return. HMRC confirmed in April 2026 that all SA109 filers are automatically exempt from MTD for ITSA for the 2026/27 tax year. The SA109 covers residence status, non-domicile claims, treaty relief, and the Foreign Income and Gains regime, all of which are relevant to U.S. citizens and green card holders filing UK taxes. If you did not file SA109 in 2024/25 but expect to in future years, you can apply for the exemption at GOV.UK rather than receiving it automatically.
Yes, if your gross UK property income exceeds the threshold (£50,000 from April 2026, £30,000 from April 2027, £20,000 from April 2028), MTD for ITSA applies regardless of where you live. However, if you claim non-resident status or file SA109 entries related to your UK property income on your Self Assessment return, you qualify for the automatic temporary exemption until April 2027. Non-resident landlords who are U.S. citizens should also be aware that UK rental income must be reported on their U.S. Form 1040, where the Foreign Tax Credit can help offset taxes paid to HMRC.
HMRC has not yet confirmed the requirements for SA109 filers beyond April 2027. The deferral is a temporary measure granted to allow MTD software to accommodate the Foreign Income and Gains regime and other SA109-related complexity. Further guidance is expected before the April 2027 deadline. U.S. expats in the UK should monitor HMRC announcements and begin preparing for eventual MTD compliance now.
File With Confidence on Both Sides of the Atlantic
Making Tax Digital adds a new layer to your UK compliance, but it does not have to be stressful. Whether you need help determining if MTD applies to you, choosing the right software, or coordinating your UK and U.S. returns, our team is ready to help.
Contact us to connect with a tax advisor who can walk you through both sides of your filing.
Two Tax Systems. One Expert in Your Corner.
This article is for informational purposes only. The content does not constitute tax, legal, or financial advice. Tax rules and regulations change frequently, and your individual circumstances may affect how they apply to you. For personalized guidance, consult a qualified tax professional.
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