If you're self-employed or a landlord, you might have heard about MTD ITSA. It’s a new way of managing your taxes, and it’s coming soon! Here’s everything you need to know, broken down in a way that’s easy to understand.
1. What is MTD ITSA?
MTD ITSA stands for Making Tax Digital for Income Tax Self Assessment. It's part of the UK government’s plan to modernise the tax system. If you're self-employed or a landlord, you’ll need to keep digital records of your income and expenses and submit updates to HMRC every three months 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 over £50,000 (starting April 2026).
People earning between £30,000 and £50,000 who will need to comply from April 2027.
There are still discussions about those earning under £30,000, but for now, we’re focusing on the above thresholds.
3. When does MTD ITSA start?
Here’s when the rules will kick in:
April 2026: For those earning over £50,000 annually.
April 2027: For those earning between £30,000 and £50,000 annually.
4. What records do I need to keep digitally?
You’ll need to keep track of the following digitally:
Income
Expenses
Bank transactions related to your business or property
These records must be stored in MTD-compatible software, and you'll be required to send quarterly updates to HMRC.
5. How often do I need to report under MTD ITSA?
Here’s the breakdown of what you’ll need to submit:
Quarterly updates: 4 times a year, summarising your income and expenses.
End of Period Statement (EOPS): A year-end statement to confirm your figures.
Final Declaration: A final confirmation of your income and tax liability for the year.
6. What software do I need for MTD ITSA?
To manage your records and send updates to HMRC, you'll need MTD-compatible software. Some popular options include:
QuickBooks
Xero
FreeAgent
At Root2Growth Accounting, we can help you pick the best software for your needs and set it up for you, so you’re all ready to go!
7. What happens if I don’t comply with MTD ITSA?
If you don’t follow the rules, HMRC might impose penalties. These could be fines for things like late submissions or failing to keep digital records.
8. Do I still need to file a Self Assessment tax return?
Nope! MTD ITSA replaces the traditional annual Self Assessment tax return. Instead, you’ll submit quarterly updates, an End of Period Statement, and a Final Declaration through your MTD-compatible software.
9. How can Root2Growth Accounting help me with MTD ITSA?
At Root2Growth Accounting, we’re here to guide you through the whole process. We offer:
Expert advice tailored to your needs.
Help with setting up and using MTD-compatible software.
Assistance with quarterly updates and year-end submissions.
Ongoing support to keep you on track and ensure everything’s in order.
10. What should I do now to prepare for MTD ITSA?
Here's how you can get started:
Check when MTD ITSA applies to you based on your income.
Choose and set up your MTD-compatible software.
Get your records organised so everything’s accurate.
Reach out for professional advice to make the transition smooth and easy.
Still have questions? We’re here to help!
At Root2Growth Accounting, we specialise in helping self-employed individuals and landlords navigate MTD ITSA. Whether you need help setting up your software or understanding what’s required, we’re just a call away!
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