Making Tax Digital

9th April 2025

Making Tax Digital for Income Tax Self Assessment – MTD for ITSA

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) requires businesses and landlords with qualifying income to maintain digital records and update HMRC each quarter using compatible software.

For individuals, MTD for ITSA will be introduced in three phases:

• from April 2026, for those with qualifying income over £50,000
• from April 2027, for those with qualifying income over £30,000
• date to be confirmed, for those with qualifying income over £20,000

For MTD for ITSA qualifying income is gross rental income and/or income from self employment.

We would anticipate that in the coming weeks individuals who declared qualifying income of over £50,000 on their 2023/24 Self Assessment Return will receive notification from HM Revenue and Customs, advising that it is expected they will fall into the first phase of MTD for ITSA starting April 2026. However, the actual requirement will be assessed on an individual’s qualifying income levels for 2024/25, which should be reported to HMRC over the next ten months.

MTD for ITSA is a new system for recording and reporting income and expenses if you are self-employed and/or receive property income. When you come within scope of the MTD for ITSA, you will be required to:

1. Keep Digital Records - This is a new legal requirement to maintain business records digitally which means that a digital record-keeping system will need to be used. You will either have to use specific accounting software packages, or apps, or maintain spreadsheets to record business transactions and use bridging software to make submission.
   
   
2. Submit Quarterly Updates - You will need to submit quarterly updates to HMRC to declare business/property income and expenses for the period covered by the update. The intention is for the reports to be automatically generated by the record-keeping system, so this should not be an onerous process. The periods will be cumulative, so updates will be due for the following periods each tax year:
   
   
   1. 6 April to 5 July (due by 7 August)
   2. 6 April to 5 October (due by 7 November)
   3. 6 April to 5 January (due by 7 February)
   4. 6 April to 5 April (due by 7 May)
      
      There is an option to elect to submit updates to tie in with a calendar month, ending June, September, December and March, rather than the default tax months.
      
      
3. Finalise your tax position for the year end – this will effectively be the submission of your usual annual Self Assessment Tax Return, which combines your qualifying income sources with any other income streams and from which your final actual tax liability for the year will be determined.

MTD for ITSA does not require for Income Tax liabilities to be paid quarterly. Tax payment dates will remain the same as the current regime.

The key to this process is to be prepared ahead of your entry date, so that by the time you are mandated to make the quarterly submissions through MTD, you are comfortable and confident with the digital solution you are using to comply with the requirements.

Here at Yorkshire Dales Accountancy out team have spent a great deal of time over the last five years preparing us for the introduction of MTD for ITSA; exploring various software solutions to ensure that whatever out clients circumstances we can offer the best advice on the way forward for them.

We are here to support clients, old and new, to ensure that the transition to MTD for ITSA goes as smooth and unproblematic as possible, providing guidance for those who are comfortable in keeping their own digital records and making the quarterly submissions, and in house bookkeeping services for those who are not.

Please contact the team at Yorkshire Dales Accountancy to discuss your MTD concerns.

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