MTD ITSA Glossary
A plain English guide to the terms you will encounter when using Making Tax Digital for Income Tax. Terms are grouped alphabetically. Where a term is mainly relevant to accountants (agents) or individuals, this is noted.
A
Allowable Expenses - Business expenses you can deduct from your income to reduce your taxable profit. These must be wholly and exclusively for business purposes. Common examples include office supplies, travel costs, and professional fees.
Annual Allowances - Tax-free amounts you can earn or deduct each year. The most common is the Personal Allowance (the amount of income you can earn before paying tax). Other examples include the trading allowance (1,000 for small self-employment income).
ARN (Agent Reference Number) - A unique identifier assigned to authorised tax agents. Required for all agent API calls to HMRC. Primarily relevant to accountants.
Agent Services Account - An HMRC online account that agents (accountants) use to manage their MTD clients. Agents must have one before they can act on behalf of clients for MTD. See Agent Authorisation Explained. Primarily relevant to accountants.
B
Bridging Software - Software that takes information from your existing records (such as a spreadsheet) and submits it to HMRC in the correct digital format. HMRC explicitly supports this approach. Aligned is bridging software. See What is MTD ITSA?.
BSAS (Business Source Adjustable Summary) - An HMRC API endpoint used to calculate adjusted profit figures for a business. Used for more complex business adjustments such as accounting adjustments and loss claims.
C
Calendar Quarter Periods - An alternative to the standard tax-year-aligned quarterly periods. Calendar quarters run April-June, July-September, October-December, and January-March. Must be selected before the first update of the tax year.
Client Authorisation - The process where a client approves an agent (accountant) to access their HMRC tax data and submit on their behalf. Done through HMRC’s secure authorisation service. See Agent Authorisation Explained. Primarily relevant to accountants.
Compatible Software - Software that meets HMRC’s requirements for MTD: it can create and store digital records, submit quarterly updates, submit the Final Declaration, and receive information from HMRC. Includes full accounting software and bridging software.
Consolidated Expenses - A simplified way of reporting expenses as a single total figure, available to businesses with turnover under 90,000. The alternative is reporting detailed expense categories separately.
Cumulative Updates - From tax year 2025-26 onwards, each quarterly update covers the period from 6 April to the end of the current quarter, replacing the previous update. This means each update includes all data from the start of the tax year.
Custom Spreadsheet - Uploading your own spreadsheet format to Aligned and mapping your columns to HMRC fields. The app learns your format for future uploads using mapping profiles.
D
Digital Records - Records of income and expenses kept in a digital format (spreadsheet, accounting software, etc.). One of the three core requirements of MTD. Records must be digitally linked to your submission software - no manual re-keying between systems.
Digitally Linked - A requirement that data flows between software systems without being manually re-typed. For example, uploading a spreadsheet to bridging software is digitally linked; copying numbers by hand from a spreadsheet into a web form is not.
Disallowable Expenses - Expenses that cannot be claimed for tax relief. Examples include personal costs, depreciation, client entertaining, and fines. These are reported separately to HMRC.
F
Final Declaration - The year-end submission that replaces the annual Self Assessment tax return. Submitted through MTD-compatible software by 31 January following the tax year. Covers all income sources, not just self-employment and property. See Quarterly Update Deadlines.
Fraud Prevention Headers - Metadata that must be sent with every HMRC API call, including device information and connection details. This is a legal requirement to help HMRC prevent fraud. Your software handles this automatically.
FULFILLED - An obligation status indicating that a quarterly update has been successfully submitted to HMRC and confirmed. Displayed with a green checkmark in Aligned.
G
Government Gateway - HMRC’s online identity service. You need a Government Gateway account to connect to HMRC for MTD. Agents and individuals each have their own Government Gateway credentials.
Gov-Test-Scenario - A special header used in the HMRC sandbox (testing) environment to trigger specific test responses. Only works in testing, not in the live production environment.
M
Mapping Profile - A saved configuration that remembers how your custom spreadsheet columns map to HMRC fields. Once saved, you can reuse the same mapping for future uploads without re-mapping each time.
MTD ITSA (Making Tax Digital for Income Tax Self-Assessment) - HMRC’s programme requiring sole traders and landlords above an income threshold to keep digital records and submit quarterly updates through compatible software. See What is MTD ITSA?.
N
NINO (National Insurance Number) - A unique identifier used for tax and National Insurance purposes. Format: two letters, six numbers, one letter (e.g., AB 12 34 56 C). Found on payslips, P60s, P45s, and HMRC letters. Required to connect your HMRC account.
O
Obligation - A reporting period that you must submit data for under MTD. Each obligation has a start date, end date, and due date. You have four quarterly obligations per tax year, plus the Final Declaration. Your specific obligations appear in your HMRC account and in Aligned. See Quarterly Update Deadlines.
OPEN - An obligation status indicating that the period is due and waiting for submission. Displayed with a blue circle if not yet due, or red if overdue.
P
Penalty Points - Under the new penalty regime (from April 2026), each missed submission deadline earns one point. At 4 points for quarterly filers, a 200 financial penalty is charged. See The Penalty-Free Period.
Personal Allowance - The amount of income you can earn each year before paying Income Tax. For 2024-25, this is 12,570.
Q
Qualifying Income - Total gross income from self-employment and property combined, before expenses or deductions. This is the figure HMRC uses to determine whether you must use MTD. It does not include PAYE income, savings, dividends, or pensions. See Who Needs to Comply.
Quarterly Period - One of four reporting periods in a tax year. Standard periods: April-July (Q1), July-October (Q2), October-January (Q3), January-April (Q4). Each period has a submission deadline approximately one month after it ends.
Quarterly Update - A summary of income and expenses for a quarter, sent to HMRC through compatible software. Not a tax return - it is a progress update. Errors can be corrected in the next update. See Quarterly Update Deadlines.
R
Reasonable Excuse - A valid reason for missing a submission or payment deadline, such as bereavement, serious illness, or a natural disaster. Can be used to appeal penalty points or late payment charges.
S
SA103 - Self-employment supplementary pages for Self Assessment. Used to report self-employed business income and expenses. Under MTD, the quarterly updates and Final Declaration replace the need to fill in SA103 pages manually.
SA105 - Property income pages for Self Assessment. Used to report UK property rental income and expenses. Under MTD, property income is submitted through quarterly updates and the Final Declaration.
SA106 - Foreign property income pages for Self Assessment. Used to report rental income from properties outside the UK. Under MTD, overseas property income follows the same quarterly update process.
Self Assessment - HMRC’s system for reporting income that is not taxed at source (e.g., self-employment, property rental). MTD for Income Tax modernises Self Assessment by introducing digital records and quarterly updates.
Smart Map - An AI-powered feature in Aligned that analyses your spreadsheet column headers and data patterns to suggest how your columns map to HMRC fields. Saves time when using a custom spreadsheet format.
T
Tax Year - The UK tax year runs from 6 April to 5 April the following year. For example, tax year 2026-27 runs from 6 April 2026 to 5 April 2027. All MTD obligations and deadlines are based on the tax year.
Taxable Loss - When allowable business expenses exceed income for a period. Losses can often be carried forward to reduce future tax bills or set against other income in the same year.
Taxable Profit - Your business income minus allowable expenses. This is the amount HMRC uses to calculate your tax liability for that business.
Template Upload - Using Aligned’s pre-formatted Excel template to submit quarterly data. The template has named fields that match HMRC requirements, so no column mapping is needed.
Time to Pay - An arrangement with HMRC to pay your tax bill in instalments. Setting up a Time to Pay agreement stops late payment penalties from accruing.