Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is a UK government initiative aimed at simplifying tax reporting for self-employed individuals and landlords. Here’s a straightforward guide to help you understand the essentials:
What Is MTD for ITSA?
- A system requiring digital record-keeping of income and expenses.
- Mandates quarterly updates to HM Revenue and Customs (HMRC) using compatible software.
Who Needs to Comply?
- From April 2026:
- Self-employed individuals and landlords with annual gross income over £50,000.
- From April 2027:
- Those with annual gross income over £30,000.
Key Requirements
- Digital Record-Keeping:
- Maintain electronic records of all business income and expenses.
- Quarterly Updates:
- Submit cumulative summaries of income and expenses every three months.
- Deadlines are typically one month and seven days after each quarter ends.
- End-of-Period Statement:
- At the end of the tax year, confirm and finalize your tax information by 31 January.
Exemptions
- Individuals with annual gross income below £30,000 are currently exempt.
- Certain exemptions apply for reasons such as age, disability, or religious beliefs incompatible with digital record-keeping.
How to Prepare
- Select Compatible Software:
- Choose HMRC-approved software for digital record-keeping and submissions.
- Understand Reporting Periods:
- Familiarize yourself with quarterly reporting deadlines.
- Seek Professional Advice:
- Consult with an accountant to ensure compliance and efficient transition.
For detailed guidance, visit the official HMRC page: Use Making Tax Digital for Income Tax
By adhering to these guidelines, you’ll be well-prepared for the upcoming changes in tax reporting.
Accounts & Tax Made Easy