In an increasingly digital world, the UK government is transforming the way we handle taxes. Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is at the heart of this change. The changes may affect you if you are a sole trader or a landlord.
What is MTD ITSA?
MTD ITSA is part of HMRC’s wider Making Tax Digital initiative, which aims to modernise the UK tax system. It requires individuals with qualifying income from self-employment or property to keep digital records and submit quarterly updates to HMRC using compatible software.
Who Does It Affect?
From April 2026, MTD ITSA will apply to individuals who:
- Income/sales/turnover is over £50,000 annually from self-employment and/or property.
- Are currently required to complete a Self Assessment tax return.
From April 2027, the threshold drops to £30,000, bringing even more individuals into the scheme and from April 2028, the threshold drops to £20,000.
Key Requirements of MTD ITSA
If you’re within scope, you’ll need to:
- Keep digital records of your income and expenses.
- Use MTD-compatible software to manage these records.
- Submit updates to HMRC every quarter by the deadline date.
- Still complete your self assessment tax return.
Benefits of Going Digital
While change can be challenging, MTD ITSA offers several advantages:
- Better tax planning: Real-time data gives you a clearer financial picture throughout the year.
- Reduced errors: Automation reduces the risk of manual mistakes.
- Simplified record-keeping: Everything stays organised in one place.
Getting Ready for MTD ITSA
Here’s how to prepare:
- Check if you’re affected: If your total income from self-employment and property exceeds £50,000, you’ll need to comply from April 2026.
- Choose MTD-compatible software: Look for a solution that suits your business size and style. Many options integrate with bank accounts and automate data entry. We are able to assist with getting the right software option for you.
- Start keeping digital records now: The sooner you switch, the smoother the transition.
- Consider professional support: We are here to help you.
Final Thoughts
MTD ITSA represents a big shift in how we manage taxes, but it’s designed to make life easier in the long run. By starting early and embracing digital tools, you can stay ahead of the curve and keep your financial affairs running smoothly.
Don’t wait for the deadline, start preparing today.
If you have questions about MTD ITSA or need help choosing the right software, give us a call to discuss this.
Please always seek professional advice before taking any action. We are happy to answer questions in future issues. Please send your questions through the contact us page on our website: www.champconsultants.co.uk
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