You may already be familiar with Making Tax Digital (MTD), but the extension to Income Tax Self Assessment (ITSA) is something many self-employed individuals and landlords need to start preparing for.
What is MTD for ITSA?
MTD for ITSA is the Government’s plan to digitise the way individuals with self-employment or property income report their tax.
Instead of an annual tax return, you will submit income and expense details quarterly through approved software.
When will you need to start using MTD for ITSA?
April 2026 – If your gross income from self-employment and/or property exceeds £50,000 based on your 2024/25 tax return.
April 2027 – If your combined income from these sources is above £30,000 based on your 2025/26 tax return.
The new reporting requirements will not apply if your income is below £30,000, and certain exemptions are available for those who cannot meet the digital requirements.
How do you know if you are affected?
HM Revenue & Customs (HMRC) has released a guidance tool that allows taxpayers to check if they need to comply with MTD for ITSA.
The tool will ask a series of questions and give you a clear indication of when you need to start using MTD for ITSA.
However, note that this tool is not applicable for those with foreign property income and can incorrectly assume that all company directors are within self-assessment.
What is included in your qualifying income?
Your qualifying income is the total amount you earn from self-employment and/or property in a tax year.
This will determine whether you meet the thresholds for mandatory MTD reporting.
Exemptions and voluntary sign-up
Some individuals are exempt from MTD for ITSA, such as those without a National Insurance number, trustees, and personal representatives.
If you are not required to use MTD for ITSA yet, you can still voluntarily sign up to get ahead of the changes.
We can assist you with signing up early should you so wish to. .
Preparing for MTD for ITSA
- Check your income – Ensure you know what your qualifying income is for the relevant tax years.
- Consider voluntary sign-up – If you are not yet required to use MTD for ITSA, signing up voluntarily could help you familiarise yourself with the system before it becomes mandatory.
- Use the right software – Use software compatible with MTD to submit your tax information. Our team can provide you with advice on choosing the right software and how to implement it.
For further advice on when you will need to start using MTD for ITSA or how to prepare, please contact us.
