03 June 2025
This move marks a shift toward a more modern, streamlined, and digital way of managing taxes—and it’s something all affected taxpayers should be preparing for now.
History of MTD
Originally announced at the 2015 Budget, and following formal consultation in 2016, HMRC implemented the first phase of MTD from April 2019 for VAT-registered businesses.
Building on the successful introduction of MTD for VAT, the government announced in December 2022 that MTD for ITSA will be introduced for businesses, self-employed individuals and landlords with income over £50,000 from April 2026. Those with income over £30,000 will be mandated from April 2027.
What Is MTD for ITSA?
MTD for ITSA is HMRC’s initiative to digitise the way individuals report income tax. Instead of submitting one annual Self-Assessment tax return, affected taxpayers will need to maintain digital records and send quarterly updates to HMRC using MTD-compatible software.
When Will It Affect You?
The rollout is happening in stages based on income thresholds:
- From April 2026: MTD will apply to sole traders and landlords with an annual income of over £50,000.
- From April 2027: The threshold lowers to include those earning over £30,000.
- From April 2028: The scheme will extend to individuals earning over £20,000.
If your income from self-employment or property meets these thresholds, MTD will soon become a regular part of your tax routine.
What Will You Need to Do?
To comply with MTD for ITSA, you'll need to:
- Keep digital records of your income and expenses.
- Use MTD-compatible software to maintain those records.
- Submit quarterly updates to HMRC throughout the tax year.
- Submit a final end-of-period statement (EOPS) and a final declaration (replacing the traditional Self-Assessment return).
Why It Matters?
This isn't just a new way of submitting taxes—it's a new way of thinking about tax. Quarterly updates means a more real-time view of your tax position, fewer end-of-year surprises, and improved accuracy overall.
How to Prepare?
Please don’t wait until the deadline approaches. Here are a few steps you can take now:
- Review your current record-keeping. If you still use spreadsheets or paper records, it's time to explore digital options.
- Choose MTD-compliant software that suits your needs. Many providers offer features tailored for sole traders and landlords.
- Consider professional support. Accountants and bookkeepers familiar with MTD can help you set up the right systems and stay compliant.
Final Thoughts
MTD for ITSA is more than just a compliance issue—it’s an opportunity to improve the way you manage your finances. With the first phase arriving in April 2026, there’s still time to prepare, but acting early will help you avoid last-minute stress and ensure a smooth transition.
Need help getting ready for MTD? Speak to a qualified tax advisor or accountant to explore your options and build a plan that works for you.
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