Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) forms part of the Government’s wider plans to make tax reporting digital rather than paper-based.
The roll-out began with VAT-registered companies which are now required to report their VAT to HM Revenue & Customs (HMRC) using recognised digital software.
Similar plans were due to take effect for self-assessment reporting in April 2024.
However, the Government has announced a two-year delay and MTD for ITSA initiative, which will now be phased in from April 2026.
The move will give self-employed workers, sole traders and landlords more time to prepare for the upcoming changes. However, it is important to start preparing for these changes now.
What is changing?
From the new start date, MTD for ITSA will apply to all self-employed workers and landlords with property and/or business income of more than £50,000.
Anyone who meets these criteria must keep digital records and provide quarterly updates on their income and expenditure to HMRC through MTD-compatible software.
Those with an income of between £30,000 and £50,000 will also need to comply with this from April 2027. However, all taxpayers will be able to join voluntarily beforehand if they wish to eliminate common errors and save time managing their tax affairs.
What about partnerships?
MTD for ITSA will not be extended to general partnerships in 2025, as previously announced. However, the Government says it “remains committed to introducing MTD for ITSA to partnerships in line with its vision set out in the Tax Administration Strategy”.
Under the original plans, MTD would also be extended to Corporation Tax, but the Government is yet to confirm when this final phase will begin.
Although 2026 may seem like a long way off, it is important to prepare for the changes to self-assessment reporting in plenty of time.
What preparations do you need to make?
Many of our clients are already using computer-based accounting packages such as Xero, Sage or Quickbooks.
These packages will not only future-proof your business in readiness for each new Making Tax Digital requirement in the coming years, they also enable you to share financial information in real time with our team and quickly produce bills and invoices.
To find out more please get in touch with us today.
