MTD For ITSA (Making Tax Digital for Income Tax and Self-assessment

What is MTD for Income Tax?

HMRC have announced that MTD ITSA will be introduced effective from April 2026. Individuals who are subject to income tax on the profits of their trade, profession, vocation or property business will be required to:

• Keep their accounting records electronically using a suitable software

  
  

• Provide their ITSA return information to HMRC through MTD compatible software

  
  

• File quarterly returns to HMRC with details of their income and expenditure together with any other information that HMRC specifies. 

  
  

• File a digital full tax return after the tax year has ended to finalise their tax position.

  
  

Although the frequency of reporting is going to change to quarterly and annually rather than just annually, the timing of tax payments will not and the current system of payments on account and balancing payment by 31 January after the tax year is expected to remain in place for the foreseeable future.

When is it happening?

The introduction of MTD for ITSA will be phased, with the start date depending on a taxpayer’s income:

• from April 2026, for those with qualifying income over £50,000

• from April 2027, for those with qualifying income over £30,000

  
  

Those with income under £30,000 are, for the time being, exempt from MTD ITSA. However, this decision will be kept under review.

It is important to note that the above thresholds look at gross trading/property income (before expenses or deductions).

Where a taxpayer has more than one trade, or trading and rental income, it is the total figure which needs to be considered.

(For MTD ITSA Purposes ‘income’ means total takings or turnover before any allowable expenses)

Why are HMRC introducing MTD for ITSA?

• To reduce the risk of unintentional customer errors

• To save time when customers come to submit their end-of-year tax return

• To support wider productivity and less time managing paperwork through use of digital tools

• To enable HMRC to better tailor services to customers

  
  

How are we helping our current clients and new clients to make the transition?

Although MTD for ITSA is only coming into effect from April 2026, we have decided that our practice will start to make the transition from April 2025.

This will allow our clients to monitor their turnover and ensure that they remain complaint with the new regulations from HMRC.

We also feel that by making the transition early, this will allow time for our clients to get used to providing records monthly as we know this will be a big change for most.

Our aim is to provide the best possible software at the lowest possible price as we appreciate that this will be an additional cost to you. 

For more information on how we can help you prepare for the changes please feel free to contact us at the office on 01772 417220 or via email info@adkbk.co.uk.