Navigating the New HMRC Making Tax Digital (MTD) for Income Tax Self Assessment

Last Updated: April 2025

HM Revenue & Customs (HMRC) is set to overhaul the Self Assessment system with the introduction of Making Tax Digital for Income Tax Self Assessment (MTD for ITSA). This initiative aims to modernise the tax system, making it more efficient and reducing errors.

What Is MTD for ITSA?

MTD for ITSA requires sole traders and landlords with business or property income to:

  • Maintain digital records of income and expenses.
  • Submit quarterly updates to HMRC using compatible software.
  • Submit an end-of-period statement annually.
  • Pay any tax due by 31 January following the end of the tax year.

These measures are designed to reduce the tax gap and bring the tax system in line with modern digital expectations. The tax gap for Self Assessment businesses is estimated at £5 billion, with errors contributing to around 18.5% of this amount.

Who Will Be Affected?

The implementation of MTD for ITSA will occur in phases:

  • From 6 April 2026: For individuals with qualifying income over £50,000.
  • From 6 April 2027: For individuals with qualifying income over £30,000.
  • From 6 April 2028: For individuals with qualifying income over £20,000.

Qualifying income includes the total gross income from self-employment and property. Income from other sources, such as employment or dividends, is not included.

Benefits of MTD for ITSA

While the transition may seem daunting, MTD for ITSA offers several advantages:

  • Reduced Errors: Digital records minimise manual errors.
  • Time Efficiency: Quarterly updates streamline the reporting process.
  • Real-Time Insights: Regular submissions provide up-to-date financial information.
  • Enhanced Support: HMRC can offer more tailored assistance based on timely data.

Preparing for the Transition

To ensure a smooth transition to MTD for ITSA:

  • Assess Eligibility: Determine if your income exceeds the thresholds for MTD.
  • Select Compatible Software: Choose software that meets HMRC's requirements for MTD.
  • Maintain Digital Records: Ensure all income and expenses are recorded digitally.
  • Stay Informed: Keep up to date with HMRC's guidance and updates on MTD.

By proactively preparing, you can navigate these changes effectively and ensure compliance with the new system.

Why Choose Reckoner Audit?

At Reckoner Audit, we are dedicated to helping our clients seamlessly transition to the new Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) system. Our team of experienced professionals provides tailored solutions to ensure your business remains compliant with the latest HMRC requirements. From assisting with the setup of MTD-compliant digital record-keeping systems and selecting the right software to managing quarterly submissions and end-of-period statements, we handle all aspects of the MTD process. We also offer ongoing support to keep you informed of any regulatory changes and provide strategic tax advice to optimise your position. With Reckoner Audit, you can rest assured that your MTD transition will be efficient, stress-free, and fully compliant.

For more detailed information and resources, visit the HMRC MTD for ITSA guidance.

Note: The information provided in this article is based on the latest available guidance from HMRC as of April 2025. Please refer to HMRC's official website for the most current information.