MTD for Income Tax Self-Assessment (ITSA)
UPDATE…
Making Tax Digital (MTD) for Income Tax is a major HMRC initiative that replaces the annual Self Assessment tax return with a requirement for digital record-keeping and quarterly updates. It applies primarily to self-employed individuals and landlords who exceed specific income thresholds.
Timeline for mandation:
Your start date depends on your total "qualifying income" (gross income from self-employment and property - before expenses) which is calculated from your 2024/2025 submitted Self Assessment Tax Return figures:
From 6 April 2026: If your qualifying income is over £50,000 (based on 2024/25 tax return).
From 6 April 2027: If your qualifying income is over £30,000 (based on 2025/26 tax return).
From 6 April 2028: If your qualifying income is over £20,000 (based on 2026/27 tax return).
Core Requirements
Once mandated, you must complete three primary digital actions:
Digital Record Keeping: You must use compatible software to store digital records of all business/property income and expenses as they occur, such as QuickBooks, Xero, Sage or even spreadsheets
Quarterly Updates: You must send a summary of your income and expenses to HMRC every three months through your software.
Final Declaration: By 31 January following the tax year, you must submit a digital final declaration to confirm your total income, claim reliefs, and finalise your tax position.
3. Reporting Deadlines
For those starting in April 2026, the quarterly deadlines are:
Quarter 1 (6 Apr – 5 Jul): Deadline 7 August
Quarter 2 (6 Jul – 5 Oct): Deadline 7 November
Quarter 3 (6 Oct – 5 Jan): Deadline 7 February
Quarter 4 (6 Jan – 5 Apr): Deadline 7 May
Please note that the quarters can be changed to calendar quarters.
4. Who is Exempt?
Certain groups do not currently have to join MTD for Income Tax:
Limited Companies: They are currently exempt from these specific ITSA rules.
Partnerships: Mandation for general partnerships is expected at a later date, yet to be confirmed.
Digitally Excluded: You can apply for an exemption if you cannot use digital tools due to age, disability, or lack of internet access.
Non-Qualifying Income: Income from PAYE wages, pensions, and savings interest does not count toward the thresholds.
5. Next Steps to Prepare
Review your income: Check your 2024/25 tax return to see if you meet the £50,000 threshold for April 2026.
Select software: Ensure you have MTD-compatible software or bridging software if you prefer spreadsheets.
Contact us if you need any assistance with relevant software to see if we have any discounts available.