What Is MTD ITSA, and How Will It Affect Self-Employed Individuals?
MTD ITSA stands for Making Tax Digital for Income Tax Self Assessment. It’s an extension of the government’s Making Tax Digital (MTD) initiative, which already applies to VAT. MTD ITSA focuses on streamlining the process of reporting income tax for:
Self-employed individuals
Landlords with annual rental income
Under MTD ITSA, you’ll need to:
Keep digital records of your income and expenses.
Submit quarterly updates to HMRC through MTD-compatible software.
3. File an End of Period Statement (EOPS) and a Final Declaration to confirm your annual income and tax obligations.
Who Does MTD ITSA Apply To?
MTD ITSA will apply to:
•Self-employed individuals and landlords with an annual business or property income exceeding £50,000 starting from April 2026.
•Those with income between £30,000 and £50,000 starting from April 2027.
HMRC is still consulting on how MTD ITSA will apply to individuals earning below £30,000 annually, but it’s important to stay informed about future changes.
How Will MTD ITSA Affect You?
If you’re used to keeping paper records or spreadsheets, you’ll need to switch to MTD-compatible software to maintain your records digitally.
2.Quarterly Reporting
Instead of filing a single Self Assessment tax return once a year, you’ll submit four quarterly updates to HMRC. These updates provide a snapshot of your income and expenses throughout the year.
3.End of Year Submissions
You’ll still need to finalize your accounts at the end of the year, but the process will be streamlined through digital tools.
4.Increased Transparency
With regular updates, you’ll have a clearer picture of your tax obligations throughout the year, reducing the risk of surprises at year-end.
What Do You Need to Do to Prepare for MTD ITSA?
1.Determine If MTD ITSA Applies to You
Check your annual income from self-employment or property to see when you’ll need to comply with MTD ITSA.
2.Choose MTD-Compatible Software
Popular options like QuickBooks, Xero, and FreeAgent are all MTD-compatible. These tools will help you maintain digital records and submit quarterly updates seamlessly.
3.Organize Your Records
Ensure your income and expense records are accurate and up to date. If you’ve been relying on paper receipts, it’s time to transition to a digital system.
4.Learn the New Process
Familiarize yourself with how to submit quarterly updates, End of Period Statements, and the Final Declaration.
Navigating MTD ITSA can be complex, especially if you’re new to digital accounting. A trusted bookkeeper/accountant can guide you through the transition and ensure compliance.
How TKI Bookkeeping & Accounts Can Help
At TKI Bookkeeping & Accounts, we understand the challenges that MTD ITSA presents for self-employed individuals and landlords. Our goal is to make the transition as smooth and stress-free as possible.
Here’s how we can support you:
We’ll help you understand how MTD ITSA affects your specific situation and create a plan to ensure compliance.
Choosing and setting up MTD-compatible software can be overwhelming. We’ll recommend the best option for your needs, handle the setup, and provide training to get you up to speed.
3.Quarterly Reporting Support
We’ll assist with preparing and submitting your quarterly updates to HMRC, ensuring accuracy and timeliness.
4.Year-End Submissions
From the End of Period Statement to the Final Declaration, we’ll manage your year-end submissions so you can focus on running your business.
5.Ongoing Support
We’re here to answer your questions, troubleshoot issues, and provide peace of mind as you navigate MTD ITSA.
Get Ready for MTD ITSA with TKI Bookkeeping & Accounts
Making Tax Digital for Income Tax Self Assessment is a significant change, but you don’t have to face it alone. At TKI Bookkeeping & Accounts, we’re experts in helping self-employed individuals and landlords transition to MTD seamlessly.
MTD ITSA FAQ: Everything You Need to Know
1. What is MTD ITSA?
MTD ITSA (Making Tax Digital for Income Tax Self Assessment) is part of HMRC’s initiative to modernize the tax system. It requires self-employed individuals and landlords to keep digital records of their income and expenses and submit quarterly updates to HMRC using MTD-compatible software.
2. Who does MTD ITSA apply to?
MTD ITSA applies to:
•Self-employed individuals and landlords with annual business or property income exceeding £50,000 from April 2026.
•Those earning between £30,000 and £50,000 will need to comply from April 2027.
Future plans for individuals earning below £30,000 are still under consultation.
3. When does MTD ITSA start?
•April 2026: For individuals earning over £50,000 annually.
•April 2027: For individuals earning between £30,000 and £50,000 annually.
4. What records do I need to keep digitally?
You’ll need to maintain digital records of:
•Income
•Expenses
•Bank transactions related to your business or property
These records must be stored in MTD-compatible software and submitted to HMRC via quarterly updates.
5. How often do I need to report under MTD ITSA?
You’ll need to submit:
•Four quarterly updates summarizing your income and expenses throughout the year.
•An End of Period Statement (EOPS) at the end of the tax year to confirm your figures.
•A Final Declaration to declare all your income and confirm your tax liability.
6. What software do I need for MTD ITSA?
You’ll need MTD-compatible software to manage your records and submit updates. Popular options include:
•QuickBooks
•Xero
•FreeAgent
We can help you choose the best software for your needs and set it up for you.
7. What happens if I don’t comply with MTD ITSA?
Failure to comply with MTD ITSA requirements may result in penalties from HMRC. These could include fines for late submissions or non-compliance with digital record-keeping rules.
8. Do I still need to file a Self Assessment tax return?
No, MTD ITSA replaces the traditional annual Self Assessment tax return. Instead, you’ll submit quarterly updates, an EOPS, and a Final Declaration through your MTD-compatible software.
9. How can TKI Bookkeeping & Accounts help me with MTD ITSA?
We provide:
•Expert advice tailored to your situation.
•Setup and training for MTD-compatible software.
•Assistance with quarterly updates and year-end submissions.
•Ongoing support to ensure compliance and peace of mind.
10. What should I do now to prepare for MTD ITSA?
•Determine when MTD ITSA will apply to you based on your income.
•Choose and set up MTD-compatible software.
•Organize your records to ensure accuracy.
•Seek professional advice to streamline the transition.
Still Have Questions? We’re Here to Help!
At TKI Bookkeeping & Accounts, we specialize in helping self-employed individuals and landlords prepare for MTD ITSA. Whether you need help setting up software or understanding your obligations, we’re just a call away.
Contact us today for a free consultation and let’s get your business ready for the future of tax reporting.
Comments