Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) is the new way of submitting tax information to HMRC that requires businesses i.e. self-employed individuals and landlords with qualifying income to firstly maintain digital records and update HMRC each quarter using compatible software.
The development and roll-out of MTD ITSA has not been smooth and many wondered whether the strategy would be reconsidered by HMRC following the general election, however, MTD ITSA is proceeding with the first individuals falling within the new compliance regime from 6 April 2026.
MTD ITSA Key Dates and Thresholds
The thresholds and deadlines for reporting under MTD ITSA are:
- 6 April 2026 if you have gross annual business or property income of more than £50,000 (important to note – gross turnover/income, not profit).
- 6 April 2027 if you have gross annual business or property income of more than £30,000;
- 6 April 2028 if you have gross annual business or property income of more than £20,000.
There are no dates set for the implementation of MTD ITSA for partnerships and no date for MTD implementation for corporation tax and trusts as yet.
Qualifying Income for MTD ITSA
The qualifying income will be an aggregate of the gross turnover and rental income from the individual’s trading and property businesses. Mandation from 6 April 2026 will be based on amounts reported on the individual’s 2024/25 self-assessment tax return and mandation for the 6 April 2027 intake will be based on the individual’s 2025/26 self-assessment tax return.
Exemptions from MTD ITSA
Foster carers and individuals without National Insurance numbers will be exempt from MTD ITSA.
You can find a list of other exemptions and find out if the exemption is automatic or if you have to apply for it via this link: Find out if you can get an exemption from Making Tax Digital for Income Tax – GOV.UK
If the taxpayer has a gross annual income/turnover below the VAT threshold £90,000, 3-line accounts will be required being: 1) Income, 2) Expenses and 3) Profit/Loss.
Deadlines for Quarterly Reporting
The deadlines for quarterly updates will be 7 August, 7 November, 7 February and 7 May following the end of the relevant quarter. The first quarterly updates under MTD will therefore be due for filing by 7 August 2026, and will cover either the quarter ended 5 July 2026, or 30 June 2026 (where a calendar quarter election is in place).
Reporting Requirements
If the taxpayer has a gross annual income/turnover below the VAT threshold £90,000, 3-line accounts will be required being: 1) Income, 2) Expenses and 3) Profit/Loss.
Compatible Software for MTD ITSA
There are various HMRC approved compatible software that lets you keep digital records of your business income and expenses. You can also use spreadsheets to keep digital records and compatible software to send updates to HMRC. This is known as bridging software.
Separate Digital Records
If you have more than one business, each business will require separate digital records and separate submissions for each business will be required for example there will be separate submission required if you are a landlord and a builder.
The UK properties are treated as one ‘UK property business’ and any overseas properties are treated as one ‘foreign property business’ – so separate businesses.
HMRC provides an exemption application process for those who can’t comply due to specific reasons.
The tax position will be finalised by the ‘digital tax return’ that will bring together all business and personal information needed to determine the final tax liability.
If affected, it will be important to research before you choose a software (or speak to your accountant) and make sure the software suits your needs in preparation for relevant implementation date.
We are providing various options for our clients that are within the scope of MTD for ITSA and have been proactively communicating with our clients for a while. We will shortly be writing to clients that we suspect (based on their relevant taxable income levels declared on their 2024/25 self-assessment tax return) will be falling within the scope of MTD for ITSA from 6 April 2027.
