HM Revenue & Customs’ (HMRC) Making Tax Digital initiative has been gradually evolving for several years now.

But did you know that it will soon be mandatory for landlords and small businesses that pay tax through self-assessment to use HMRC’s digital tax system?

Making Tax Digital for Income Tax & Self Assessment (or MTD for ITSA, as it’s more commonly known) is likely to be a major change for some taxpayers.

So, are you ready for the upcoming MTD for ITSA rules?

What is MTD for ITSA?

Making Tax Digital (MTD) aims to bring tax into the digital age, moving from annual paper and online tax submissions to quarterly digital uploads of your tax information.

Having to keep detailed digital records sits at the heart of MTD. Taxpayers will need to record all incoming and outgoing transactions using compatible accounting software, and then share this information in an approved digital format with HMRC.

Who will be affected by the MTD for ITSA rules?

MTD for ITSA is already at the beta testing stage and some self-assessment taxpayers have opted in to the system already.

But if you’re a landlord or sole trader who falls into the following categories, MTD for ITSA will soon become a mandatory requirement:

• From April 2026, for those with qualifying income over £50,000
  
  
• From April 2027, for those with qualifying income over £30,000
  

How do you get ready for MTD for ITSA?

If you’re already using cloud accounting software to manage your finances, MTD for ITSA won’t be a major challenge. You’re already recording your numbers in a digital format and most of the popular accounting platforms will have MTD for ITSA templates you can fill out. But if you’ve not embraced the latest in accounting tech, it’s important to upgrade ASAP.

To stay compliant, you’ll need to:

• Keep your records in a digital format
  
  
• Provide digital quarterly updates to HMRC
  
  
• Be able to provide your ITSA return information to HMRC through MTD-compatible software
  
  
• Talk to us about preparing for MTD for ITSA
  

Contact us

If you’re concerned about how MTD for ITSA may affect your finances, call us on 01904 787 973 or book a discovery call with Donald Inglis. We’ll advise you on the best accounting software and give you guidance on upgrading and preparing your bookkeeping, accounting and tax procedures for MTD for ISA.