How Will MTD ITSA Affect You?

MTD ITSA is a big change in how self-employed people and landlords in the UK handle their taxes. It’s part of the government’s drive to modernise the tax system, making things more efficient and less prone to errors. If you’re self-employed, this will likely change the way you record your income and submit your taxes. Let’s take a closer look at what MTD ITSA is, how it will impact you, and the steps you need to take to stay on top of it.

What Is MTD ITSA?

MTD ITSA stands for Making Tax Digital for Income Tax Self Assessment. It’s an extension of the government's Making Tax Digital (MTD) programme, which already applies to VAT. This new part of the initiative focuses on simplifying income tax reporting for:

• Self-employed individuals

• Landlords with annual rental income

  
  

Under MTD ITSA, you’ll need to:

1. Keep digital records of your income and expenses.

2. Submit quarterly updates to HMRC using MTD-compatible software.

3. File an End of Period Statement (EOPS) and a Final Declaration to confirm your income and tax obligations for the year.

   
   

Who Does MTD ITSA Apply To?

MTD ITSA applies to:

• Self-employed individuals and landlords with an annual business or property income of over £50,000, starting from April 2026.

• Those with income between £30,000 and £50,000 will need to comply starting from April 2027.

  
  

There are still discussions on how MTD ITSA will apply to those earning below £30,000 annually, so it’s important to stay up to date with any future changes.

How Will MTD ITSA Affect You?

1. Digital Record-KeepingIf you’ve been keeping paper records or using spreadsheets, you’ll need to switch to MTD-compatible software for keeping your records digitally.

2. Quarterly ReportingInstead of filing a Self Assessment tax return once a year, you’ll be submitting four quarterly updates to HMRC. These updates will give an overview of your income and expenses over the year.

3. End of Year SubmissionsYou’ll still need to finalise your accounts at the end of the year, but with MTD-compatible software, this will be a much smoother process.

4. Increased TransparencyWith regular updates, you’ll have a better idea of your tax obligations all year long, reducing the risk of any surprises when it’s time to file at the end of the year.

   
   

What Do You Need to Do to Prepare for MTD ITSA?

1. Determine If MTD ITSA Applies to YouTake a look at your annual income from self-employment or property to figure out when you’ll need to comply with MTD ITSA.

2. Choose MTD-Compatible SoftwarePopular options like QuickBooks, Xero, and FreeAgent are all MTD-compatible. These tools will help you keep digital records and submit your quarterly updates with ease.

3. Organise Your RecordsMake sure your income and expense records are accurate and up to date. If you’ve been relying on paper receipts or old spreadsheets, now’s the time to go digital!

4. Learn the New ProcessFamiliarise yourself with how to submit your quarterly updates, End of Period Statements, and Final Declaration.

5. Seek Professional AdviceUnderstanding MTD ITSA can be tricky, especially if you’re new to digital accounting. A professional accountant can help guide you through the transition and ensure everything is done correctly.

   
   

How Root2Growth Accounting Can Help

At Root2Growth Accounting, we understand that MTD ITSA might feel overwhelming, especially with all the changes. But don’t worry – we’re here to make the transition as easy and stress-free as possible.

Here’s how we can support you:

1. Expert GuidanceWe’ll explain exactly how MTD ITSA impacts your specific situation and help you create a plan to stay compliant.

2. Software Setup and TrainingChoosing and setting up MTD-compatible software can feel like a lot, but we’re here to help. We’ll recommend the best software for your needs, set it up for you, and make sure you know how to use it confidently.

3. Quarterly Reporting SupportWe can assist with preparing and submitting your quarterly updates to HMRC, ensuring everything is accurate and on time.

4. Year-End SubmissionsFrom your End of Period Statement to your Final Declaration, we’ll take care of your year-end submissions so you can focus on running your business.

5. Ongoing SupportWe’re always here to help answer any questions, troubleshoot issues, and give you peace of mind throughout the year.

   
   

Get Ready for MTD ITSA with Root2Growth Accounting

Making Tax Digital for Income Tax Self Assessment may be a big change, but you don’t have to face it alone.

At Root2Growth Accounting, we specialise in helping self-employed individuals and landlords transition smoothly to MTD ITSA.

Whether you need help setting up software, understanding your new responsibilities, or just want some advice, we’ve got your back. Reach out to us today and let’s get your business ready for the future of tax reporting!