Making Tax Digital for income tax self-assessment (or MTD for ITSA) will change the way you report and pay your taxes if you are self-employed, a landlord, or have any untaxed income above a certain amount.
MTD will help the UK become one of the world’s most digitally advanced tax administrations, according to the Government. It has been in effect for VAT since April 2022, with income tax as the next step.
But after several changes, the Government extended the wait for mandatory MTD for sole traders until 2026.
With guidance yet to be fully announced on the lowest bracket (£10,000), we are still in the dark about the next stages of MTD for ITSA.
What we do know, however is:
- From April 2026, sole traders and landlords with an annual business or property income exceeding £50,000 will be subject to MTD for ITSA.
- By April 2027, sole traders and landlords earning over £30,000 will be included.
In this article, we’ll look at what these changes mean for you and how you can start preparing.
Here’s how these changes compare to current rules:
Before April 2026:
- One annual submission
- Paper filings by 31st October
- Online filings by 31st January
- Fine to keep paper records
After April 2026:
- Four quarterly submissions per business
- One annual end of period statement (EOPS) per business
- One annual final declaration submission per individual
- Filing via MTD-compliant software
- Keeping digital records
MTD for ITSA — how does it work?
MTD for ITSA requires sole traders and landlords to keep digital records and use MTD-compatible software to manage, track, and send updates to HMRC.
When these rules become mandatory, you will no longer submit your self-assessment tax returns to HMRC once a year. Instead, you’ll use MTD-compatible software to:
- keep digital records of your business income and expenses
- send quarterly updates to HMRC every three months
- finalise your business income using an end of period statement (EOPS) and a final declaration each year.
If you have more than one business, you must keep separate records for each income source.
Get prepared for MTD for ITSA
With the official ruling still to be finalised, the best thing to do is prepare yourself for MTD, so that whenever it does change, you are ready for the switch.
Use MTD-compatible software
Using software that works with MTD for ITSA is your best starting point. By the time 2026 comes around, you’ll be well-versed in all things cloud accounting.
There are many cloud platforms out there, so have a browse and speak to an accountant before you make your decision.
Sign up for the pilot
While the MTD for ITSA pilot is currently paused for new sign-ups, it is definitely worth signing up once it reopens. Again, the more time you spend trying something new, the better you will get at it. It will make the switch so much easier.
Work with experts
If you hire an accountant to prepare your returns, you will have professionals on your side who can deal with the upcoming changes to income tax self-assessment, and give you time to focus on your business.
We are the experts you need. We can set you up with cloud accounting technology that suits your business, update you on the latest changes, and offer guidance on MTD for ITSA legislation.
Contact us on 01223 786930 or fill out an online contact form, and we will be happy to help.