Making Tax Digital or MTD for Income Tax Self Assessment
Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) will be a requirement from April 2026 (previously April 2023 and then April 2024).
Sole traders and landlords with business or property income above £50,000 per year will need to keep digital records for income tax and Class 4 National Insurance Contributions (NICs) using MTD
compatible software and send quarterly opdates. Those with an income of between £30,000 and £50,000 will need to do this from April 2027.
It’s estimated that over four million taxpayers will need to keep records of their income and expenditure digitally and send a quarterly summary and an end of year report.
MTD for ITSA will not be extended to general partnerships in 2025 as previously announced.
However, the government says this remains part of its MTD commitment.
What is MTD for Income Tax Self Assessment?
From 2026 you will be able to send all the information online for your Self Assessment tax return, not just your business or rental income. This will include:
employment income
bank and building society interest
dividends
pension contributions
student loan repayments.
Preparing for ITSA
You can start to prepare and test MTD for ITSA on a voluntary basis now if you are:
a UK resident
registered for Self Assessment with up to date returns and payments
a sole trader with income from one business or a landlord who rents out UK property.
Can anyone sign up now?
If you need to report income from any other sources or receive other payments that are taxable or on which you claim tax relief you won’t be able to sign up at present.
Additional ITSA software functionality will be needed before other personal income can be reported.
What happens if I sign up for MTD for ITSA now?
New businesses that want to join the ITSA pilot must first register for Income Tax with HMRC.
You can leave the pilot if you decide it’s not working for you at the moment.
You will need to participate from 2026 if your income is over £50,000 and from 2027 of your income is over £30,000.
The government is reviewing arrangements for partnerships and those with income below £30,000.
Alternatively, you can remain in the pilot and still send your Self Assessment tax return as normal.
Signing up - To sign up you will need to:
use MTD-compatible software
keep digital records
send a quarterly update summary of your business income and expenses
submit your end of period statement
submit a final declaration.
You won’t need to complete a Self Assessment tax return as you do now.
However, you’ll still need to send HMRC a Self Assessment tax return for the tax year before you join MTD for ITSA.
Each quarter you will receive an estimated tax calculation based on the information you have provided to help you budget for your tax. The quarters are:
6 April to 5 July
6 July to 5 October
6 October to 5 January
6 January to 5 April.
Information - You will need to submit details of your invoices and receipts for purchases and, as a minimum, these should include the date, the amount, and the category of income or expense.
If you already use record keeping software you will need to check whether it is MTD-compatible or can be integrated with bridging software to make your quarterly submissions.
If you currently use spreadsheets to keep your records you’ll need MTD-compatible software to send your quarterly updates to HMRC.
What is MTD compatible software?
The software you use to keep your digital tax records will have to communicate with the HMRC’s systems to allow you to file your returns.
If your accounting software is only installed on your office computer you might need to update it.
If you’re using cloud-based accounting software and can access your data at any time and from anywhere it will probably automatically update to meet the requirements for MTD.
Check with your supplier in advance to confirm that your software will meet the requirements of MTD for ITSA.
For your information...
You can find more helpful information on the Chartered Institute of Taxation website.
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