MTD and Self Assessment: How They Work Together

A common misconception is that MTD completely replaces Self Assessment. The reality is more nuanced. For those within scope of MTD, the final declaration replaces the Self Assessment tax return for the relevant income. But Self Assessment does not disappear entirely. Here is how the two interact.

What Changes Under MTD

If you are within scope of MTD for Income Tax:

• Your self-employment income is reported through quarterly updates and a final declaration via MTD software
• Your property income (if applicable) is also reported through MTD
• The final declaration replaces the self-employment and property pages of your Self Assessment return

What Stays the Same

Certain types of income are not yet covered by MTD and may still require a Self Assessment return:

• Capital gains
• Foreign income (in some cases)
• Trust income
• Certain investment income
• Partnership income (until MTD for partnerships is implemented)

If you have income that falls outside MTD's scope, you may need to file both a final declaration through MTD and a supplementary Self Assessment return for the remaining income.

The Final Declaration

The final declaration is essentially MTD's version of the Self Assessment tax return. It:

• Confirms your total income and expenses for the year
• Includes adjustments like capital allowances and loss relief
• Calculates your Income Tax and National Insurance liability
• Is due by 31 January following the end of the tax year (the same deadline as Self Assessment)

For most sole traders with straightforward tax affairs, the final declaration is all you need. There is no separate Self Assessment return to file.

Payment Dates

MTD does not change when you pay your tax. The payment schedule remains:

• 31 January: Balancing payment for the previous tax year, plus first payment on account for the current year
• 31 July: Second payment on account for the current year

These dates are unchanged whether you report through MTD or Self Assessment.

The Transition

If you have been filing Self Assessment for years, the transition to MTD means:

• You stop filing the annual Self Assessment return for your self-employment and property income
• You start submitting four quarterly updates plus a final declaration instead
• Your HMRC online account will show your MTD submissions and running tax estimate

The transition should be seamless if you are using MTD-compatible software. Accounted guides you through the process.

Will Self Assessment Eventually Disappear?

HMRC's long-term vision is for MTD to cover all taxpayer groups and income types. Eventually, Self Assessment as we know it will likely be replaced entirely by MTD reporting. But this is years away — the current focus is on sole traders and landlords.

MTD is coming. Accounted is already compliant. Start free and be ready before the deadline.