Making Tax Digital. What’s new?
Posted on 14th April 2025
Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) will affect some people from April 2026. Starting in April 2025, HMRC will contact sole traders and landlords who may need to prepare.
The plan is to phase in the introduction of MTD for ITSA, starting next year, for people who have income from self-employment or property income. This will apply to you:
from 6 April 2026, if your annual turnover exceeds £50,000
from 6 April 2027 if your annual turnover exceeds £30,000.
How will HMRC know if MTD for ITSA applies to me?
THMRC will use the figures from your income tax return for 2023/24 to decide whether to write to you. Your income for the 2024/25 tax year will govern whether you must meet the MTD for ITSA requirements next year. The decision depends on your gross income, before deductions.
Currently, the rules don’t apply to partnerships, but this is likely in the future.
HMRC won’t automatically sign you up for MTD for ITSA so you must do this yourself. If you think the rules will apply, you can sign-up voluntarily now for either 2025/26 or 2026/27.
What will HMRC’s letters say?
There are two versions of the letter you might receive. One is for taxpayers who can sign-up immediately. The other is for people who can’t yet join or who have turnover between £45,000 and £50,000.
If you are self-employed in the construction sector you will know from experience that your income can vary a lot. Collecting all the information for your 2024/25 tax return and submitting it as soon as possible is a good idea. If you need to become part of MTD for ITSA next year, this will give you time to prepare.
How to meet the requirements of MTD for ITSA
You must use MTD compatible software that can meet the requirements for quarterly updates and your final year-end figures. You should confirm your software can:
create, store and correct digital records for your business income and expenses
send quarterly updates
submit your tax return by 31st January following the end of each tax year
receive information, such as your tax estimates, from HMRC.
You can add all your records manually or use software that connects to your business bank account and other data collection apps and programs.
Your software must also accommodate other sources of income or gains that you must declare for income tax purposes. These might include income from property overseas, savings or dividends. You can choose a single solution for all your needs, like Xero, or use several products together.
You can continue using spreadsheets or other accounting tools. To do this you’ll need bridging software that meets MTD for ITSA requirements.
How to Register for MTD for ITSA
You can sign up voluntarily now if:
your personal details are up to date with HMRC
you’re a UK resident
you have a National Insurance number
you have submitted at least one Self Assessment tax return
you’re up to date with your tax records and don’t have any outstanding tax to pay
you use an accounting period that runs from either 6 April to 5 April or 1 April to 31 March. You must make sure your software can support one of these accounting periods.
To sign up you must know:
your National Insurance number
your business start date or the date you started receiving property income within the last two tax years
your accounting method
the tax year you will start using MTD for ITSA.
If you’re a sole trader, you’ll also need:
the business name you use on your invoices
your business address
your business or trade type.
You’ll need to sign up separately for each source of income you receive.
You will need your user identification (ID) and password, and you might have to provide proof of your identity.
If you work with an authorised agent, they can sign up to MTD for ITSA on your behalf.
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