Preparing for MTD for ITSA

Making Tax Digital for Income Tax Self Assessment or MTD for ITSA is part of HMRC’s plans to digitise taxation. Currently, you submit a single annual self-assessed tax return. In contrast, MTD for ITSA requires quarterly digital submissions about your income and expenses. You must also make an end-of-period statement each year. 

 

Step One: Signing up for MTD for ITSA. If MTD for ITSA applies to you this year, you must sign up before April. If you already have an agent to act on your behalf with HMRC, they can sign up on your behalf. 

 

To sign up, you must confirm: 

 

If you’re a sole trader, you must also provide: 

 

You must include all your sources of income from self-employment or property when you sign up. 

 

Step Two: Use compatible software. You must keep your financial records using ‘compatible’ software for MTD, like Xero. If you currently use a spreadsheet or software on a standalone PC in your office, you’ll probably need to change. 

 

Step Three: Change your financial processes. Giving your accountant a bag of receipts and sales invoices once a year won’t work anymore. For MTD for ITSA you must keep your financial records up to date digitally. This includes receipts, invoices and bank statements. To avoid missing quarterly deadlines, you should aim to update your records regularly. Make sure you code all your income and expenditure accurately to save time before each submission. Most importantly, back up your data. If you use accounting software in the cloud this probably happens automatically, but it’s important to check. 

 

Step Four: Plan for quarterly reporting. You have one month after the end of each quarter to make your submissions. The quarterly deadlines are: 

 

If you miss the submission deadline you may receive a penalty after the initial 12-month period (April 2026 to March 2027). 

 

The LEOBS team will provide an estimation of the tax bill each quarter for our existing bookkeeping customers to help improve tax planning. 

 

Step Five: Making your annual declaration. You must make a final statement and pay your tax bill by 31 January following the end of each tax year. This allows you to make any final adjustments to your quarterly submissions. You can also claim your annual allowances and reliefs. You must also provide a Self Assessment Tax return for other income and pay any additional tax by 31 January. 

 

If your current accounting period isn’t in line with the tax year, changing would simplify your reporting requirements. 

 

Yes, speeding up and automating processes can help you keep up to date for MTD for ITSA. Sending out your invoices promptly improves cashflow and keeps your income in the correct reporting period. Using an app like Dext to scan receipts immediately will save time too. Regular bank reconciliation helps to minimise errors and ensure your financial records are accurate. 

 

Yes, we’re happy to help you prepare for MTD for ITSA. We can advise you how to simplify your processes and meet quarterly submission requirements. We’ll help you test system integrations and manage the change from annual to quarterly reporting.