Making Tax Digital for Income Tax & Self-Assessment

Making Tax Digital for Income Tax and Self-Assessment (MTD for ITSA)

MTD for ITSA means that sole traders and landlords with qualifying income will need to keep digital records and send updates to HMRC every quarter using compatible software.

For individuals, MTD for ITSA will roll out in three phases:

• Starting April 2026, for those with qualifying income over £50,000 in the year ended 5th April 2025.
• Starting April 2027, for those with qualifying income over £30,000 in the year ended 5th April 2026.
• Starting April 2028, for those with qualifying income over £20,000 in the year ended 5th April 2027 and beyond.

What is Qualifying Income?

MTD for ITSA will apply to self-employed individuals and landlords who have total turnover/gross income above the mentioned thresholds.

Qualifying Income includes:

• Self-employment turnover
• UK property gross income
• UK Furnished Holiday Let (FHL) gross income
• Foreign property gross income

If your self-employment or property trade starts part way through a tax year, HMRC will scale up the income to reach an estimated annual figure.

For example, if your trade begins halfway through the tax year, and generates turnover of £25,000, this will be treated as annual qualifying income of £50,000.

Exemptions

Whilst this list is non-exhaustive, the requirements to comply with MTD for ITSA will not be applied to:

• Partnership income (although it is anticipated Partnership income will later be brought into the scope of the regime).
• Income received from Trusts.
• Income received from Estates.
• Taxpayers who do not have a UK National Insurance Number.

In addition to the above, landlords who jointly own property and are typically notified of their share of rental income from said properties after deduction of expenses, will be able to use the net rental income figure as the basis of qualifying income on these properties.

Whilst not a full exemption, taxpayers who are required to complete self-assessment form SA109 (Residence, remittance basis etc) will not be required to use MTD until April 2027.

Filing Requirements

If an individual breaches the thresholds mentioned, they will be required to send HMRC quarterly submissions, and a final declaration at the end of the tax year.

Quarterly submissions will contain a summary of income and expenditure transactions in the reporting period. Information on each transaction must be retained including the date, nature, and amount received/paid, however HMRC will only receive a summary for the quarter for each qualifying trade.

The default reporting periods are as follows:

An election will need to be made if you want to use calendar quarters, i.e. quarters ending 30th June, 30th September, 31st December, and 31st March.

You don’t need to make extra tax payments based on these quarterly summaries. The usual income tax payment deadlines remain unchanged.

At the end of the year, you’ll file an annual return that includes the summaries you sent earlier, along with any necessary tax or accounting adjustments.

The deadline for submitting this final return, along with payment of any balancing liability, will remain as 31st January.

Throughout the year, you will be able to view submissions, and forecasts of your potential tax liability via the HMRC website.