Attention Self-Employed & Landlords: Making Tax Digital for Income Tax (MTD ITSA) Is Coming!

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Making Tax Digital for Income Tax is fast approaching! Here’s what you should know if you’re self-employed or a landlord…

What is MTD?

MTD is a government initiative from HM Revenue and Customs (HMRC), to use digital tools and software, to record and submit your tax information to HMRC on a more regular basis.

Why is it important for HMRC?

  1. Accuracy: MTD will reduce errors in your tax returns and reduce the chance of income and tax being missed to reduce the HMRC Tax Gap.
  2. Efficiency: It will save time with streamlined processes and will give HMRC more regular sight of your tax affairs and streamline Tax Administration.
  3. Compliance: Stay up-to-date with the latest tax regulations and preparing for future changes.

Who does it apply to?

  1. MTD ITSA will be mandatory for individuals (self-employed and landlords) with annual business or property income (income and not net profits) over the relevant thresholds below.
  2. MTD ITSA will be based on your reported income from the previous year’s tax return.
  3. MTD ITSA is NOT mandatory for those with income under the relevant thresholds, and also not currently mandatory for trading partnership but you can still choose opt in if you’d like to benefit from the digital system

Key Dates and thresholds:

  1. April 2026: MTD ITSA will be mandated for self-employed businesses & landlords with income/turnover above £50,000 during the tax year to 5th April 2025.
  2. April 2027: MTD ITSA will be mandated for self-employed businesses & landlords with business turnover above £30,000 during the tax year to 5th April 2026.
  3. April 2028/29 (TBC): MTD ITSA will be mandated for self-employed businesses & landlords with business turnover above £20,000 during the tax year to 5th April 2027 or 5th April 2028.

What You Need to Do:

  1. Get MTD-ready Software: Ensure your accounting software is compatible with MTD. You’ll need it for submitting your quarterly updates and annual tax return to HMRC.
  2. Digitally Maintain Records: From 2026, your financial records must be stored digitally and submitted to HMRC via your software.
  3. Quarterly Updates: Prepare to send quarterly updates in addition to an annual tax return (from 2026). These quarterly updates will reflect your income and expenses and be tied up with the usual tax return.
  4. Speak to Your Accountant: Don’t leave it to the last minute. Ensure you’re fully prepared for MTD ITSA so you don’t face penalties and keep your tax filings smooth.

Future plans for other businesses

  1. HMRC have stated that MTD for corporation tax will not be mandated before April 2026.
  2. No timetable has yet been introduced for partnerships.

Remember to plan Ahead

As your trusted accountants, we are here to help guide you through the transition. Contact us today to ensure your tax affairs are MTD-ready and see whether you fall into the small area of people who may be exempt from MTD!

Email us today at help@elsbyandco.co.uk or give us a call on 01933 312950