During April’s Facebook Live, I discussed how UK businesses and landlords should prepare for Making Tax Digital for Income Tax and Self-Assessment.
Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is on its way — and if you’re a UK business owner, sole trader, or landlord, it’s time to start preparing. The new rules may seem daunting at first, but getting ready early can make the transition much smoother.
Whether you’re tech-savvy or still using spreadsheets, this guide breaks down what MTD ITSA means and how you can prepare.
What is MTD ITSA?
MTD ITSA is part of the Making Tax Digital initiative introduced by the government in 2015. The initiative is designed to modernise the tax system by requiring digital record-keeping and quarterly reporting to HMRC. MTD for VAT was the first stage, and now MTD ITSA is being introduced.
Who will be affected?
MTD ITSA may apply to you if you are self-employed and/or you are a landlord with UK property income.
From April 2026, all self-employed individuals and landlords with a total income (either from business or rental income) of over £50,000 will need to:
- Keep digital records of income and expenses
- Submit quarterly updates to HMRC using MTD-compatible software
- Submit a final declaration annually.
In April 2027, all those with an income over £30,000 will be required to follow, with those whose income is over £20,000 to file from April 2028.
At this stage, no announcements have been made about partnerships or limited companies.
6 Key Steps to Prepare for MTD ITSA
If you are already keeping your accounts up to date on a regular monthly basis, then you are already a step ahead of the game. Here are 5 tips to help you get prepared for MTD ITSA.
- Understand Your Income Streams
First, you need to work out whether your income puts you over the MTD ITSA threshold so that you can work out when you need to start submitting regular quarterly returns. Combine all relevant income from your self-employment and/or rental income from being a landlord. If you are close to the £50,000 mark, start planning now because you may be required to join the scheme in April 2026. - Switch to Digital Record-Keeping
If you aren’t already using accounts software or spreadsheets to keep your accounts, now is when you need to make the move to start. While you will be able to keep your records using spreadsheets, you will need to pay for additional bridging software to file your returns, so using MTD compliant accounts software like QuickBooks, Xero, FreeAgent, or Sage, to do your bookkeeping is the method I would recommend. Not only will you be able to submit your quarterly returns without needing to use additional software, but you will be able to produce your financial reports, ensure all accounts are properly reconciled, and attach the proof for each transaction directly to the entry in the accounts.
You will need to do the following:
– Ensure you are using MTD compatible software
– Record your income and expenses in real-time (or as close as possible)
– Maintain digital copies of receipts and invoices.
The earlier you start using software and getting into the habit of doing your accounts regularly, the easier it will be when it comes time to file through MTD ITSA. - Talk to your Accountant or Bookkeeper
If you work with an accountant or bookkeeper, check with them to see if they are MTD-ready. Ask:
– Are they using MTD-compliant software
– Can they support you with quarterly submissions
– Do they offer training or transition support
If you don’t have an accountant or bookkeeper, this might be a good time to find someone who is qualified and can help to ensure you are meeting all the legal requirements. - Get Familiar with Quarterly Reporting
Under MTD ITSA, you will need to send a summary of income and expenses to HMRC every 3 months. While HMRC won’t calculate your tax based on these updates, they will build a picture of your estimated liability.
You will also be required to submit a final declaration at the end of the year (this will replace the traditional Self-Assessment return).
Practice now by doing a dry run, especially if you are already using accounting software. - Make Sure You Have A Government Gateway Login
You will need to ensure that you have your Government Gateway login details and know how to access your account. If you are going to be submitting your quarterly returns yourself, you will need to use the login details to submit the information.
If you are going to have your accountant or bookkeeper submit your quarterly returns, you will need to permit them to act on your behalf. If you have both a bookkeeper who does your day-to-day bookkeeping and an accountant who submits your self-assessment, you can set your bookkeeper up to be a supporting tax agent just to submit the quarterly returns. - Join the MTD ITSA Pilot (Optional but Recommended)
HMRC are running a pilot program which is open to a small number of individuals and businesses. Joining the pilot early gives you a head start, lets you test out your systems, and reduces stress when the rules go live.
Talk to your bookkeeper or accountant to see if you are eligible to join the pilot.
Benefits of Being MTD-Ready
While it might seem like more admin, MTD ITSA could actually simplify your tax life. The benefits include:
- Better visibility of tax owed throughout the year
- Fewer surprises at tax time
- Improved record accuracy
- Can help with cash flow management
- Easier collaboration with your accountant or bookkeeper
MTD ITSA is more than just a compliance obligation, it’s an opportunity to modernise your business finances. By starting early, choosing the right tools, and getting professional support, you’ll be in a strong position to meet HMRC’s requirements and avoid last-minute stress. can ultimately lead to a more successful and financially secure business.
If you have any questions about how you can prepare for MTD ITSA, please feel free to e-mail me.