
Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA)
"WHAT IS IT? DO I NEED TO WORRY ABOUT IT?"
MTD FOR VAT REGISTERED BUSINESSES
MTD FOR SELF-ASSESSMENT
WHAT IS MTD ITSA EXACTLY?
MTD ITSA stands for Making Tax Digital for Income Tax Self Assessment. It’s an extension of the government’s Making Tax Digital (MTD) initiative, which already applies to VAT.
MTD ITSA focuses on streamlining the process of reporting income tax for:
- Self-employed individuals.
- Landlords with annual rental income.
Under MTD ITSA, you’ll need to:
1. Keep digital records of your income and expenses.
If you’re used to keeping paper records or spreadsheets, you’ll need to switch to MTD-compatible software to maintain your records digitally.
2. Submit quarterly updates to HMRC through MTD-compatible software.
Instead of filing a single Self Assessment tax return once a year, you’ll submit four quarterly updates to HMRC. These updates provide a snapshot of your income and expenses throughout the year.
3. File an End of Period Statement (EOPS) and a Final Declaration to confirm your annual income and tax obligations.
You’ll still need to finalise your accounts at the end of the year, but the process will be streamlined through digital tools.
THREE GREAT REASONS FOR QUARTERLY REPORTING, AS PART OF MTD
WHO EXACTLY DOES THIS EFFECT AND WHEN?
MTD ITSA will apply to:
- Self-employed individuals and landlords with an annual business or property income exceeding £50,000, starting from April 2026.
- Those with income between £30,000 and £50,000, starting from April 2027.
HMRC is still consulting on how MTD ITSA will apply to individuals earning below £30,000 annually, but it’s important to stay informed about future changes.
What Do You Need to Do to Prepare for MTD ITSA?
There are 5 steps I recommend at this stage.
1. Determine if MTD ITSA applies to you
Check your annual income from self-employment or property to see when you’ll need to comply with MTD ITSA.
2. Choose MTD-compatible software
A popular option and the one I recommend – Xero – is MTD-compatible. Its tools will help you maintain digital records and submit quarterly updates seamlessly.
3. Organize your records
Ensure your income and expense records are accurate and up to date. If you’ve been relying on paper receipts, it’s time to move to a digital system.
4. Learn the new process
Familiarise yourself with how to submit quarterly updates, End of Period Statements, and the Final Declaration…or speak to someone who knows all about it.
5. Seek professional advice
Navigating MTD ITSA can be complex, especially if you’re new to digital accounting. A trusted accountant will guide you through the transition and ensure compliance.
You don’t have to face this alone. I can offer expert guidance and create a plan to ensure compliance. I will also support you to get the systems and processes in place that will really help with preparing and submitting your quarterly updates to HMRC, ensuring accuracy.
In addition, I can help you manage the End of Period Statement to the Final Declaration, so you can focus on running your business, whilst making informed decisions because you know your numbers.
I am always here to answer questions and to support your growth.
While this blog aims to provide helpful information, it’s important to remember that every business and person is unique. So, before making any decisions, we highly recommend seeking professional advice. We want to ensure that you have all the support you need to make the best choices for your situation!
accountancy tips financial support Income Tax Self Assessment MTD