MTD for Income Tax Self Assessment is being introduced from April 2026 and will be one of the biggest changes to the Self Assessment system since its introduction.
What is MTD for ITSA?
MTD for ITSA stands for Making Tax Digital for Income Tax Self Assessment.
In short, it will change the way business owners and landlords keep their records and how they report their income to HMRC.
Who is affected by this and when does it start?
MTD for ITSA will be introduced in April 2026 for self-employed individuals and landlords with sales and/or rental receipts of over £50,000. The threshold will then reduce to £30,000 from April 2027.
It is important to note that the threshold relates to income before any expenses are deducted. In addition, if you have both self-employment income and rental income it is the combined income figure that will be used by HMRC when determining if you are above the threshold.
You may have previously heard that the original introduction date was postponed, however, during the Autumn 2024 budget the government signalled its commitment to its introduction and as such it now seems unlikely that any further postponements will occur.
What is required?
Under MTD for ITSA self-employed individuals and landlords must keep their business records digitally and make quarterly submissions of income and expenses to HMRC, known as quarterly updates.
Then, at the end of the tax year a final declaration will also be required, which will bring together all sources of income, gains and reliefs (in a similar way to the self-assessment tax return currently prepared).
This new system will replace the self-assessment tax return.
When will my first submission be due?
If you are required to report under MTD for ITSA from April 2026, your first quarterly update will cover the period 6 April to 5 July 2026 (or 1 April to 30 June 2026 if you make a ‘calendar quarter election’) and will be due for submission by 7 August 2026.
The first ‘final declaration’ detailing all income, gains and reliefs for the 2026/27 tax year will be due for submission by 31 January 2028 (the same as the self-assessment tax return deadline).
What about software?
You should consider whether you have the necessary software and processes in place to submit digital returns every quarter. If not, we strongly recommend looking into this now so that you’re ready for when the changes come.
If you’re looking for MTD compatible software we recommend having a look at Xero, a cloud based bookkeeping software which can link to your business bank account to help reduce the time spent keeping your records and helping maintain compliance with MTD.
Are there any exemptions?
Other than having income below the MTD for ITSA threshold there are a few exclusions. These are:
Digital exclusion:
- It’s not reasonably practical for the individual to use digital technology to keep their business records due to age, disability, remoteness of location or any other reason.
- They are subject to an insolvency procedure.
- The business in run entirely by practicing members of a religious society or order whose beliefs are incompatible with using keeping electronic records.
If any of the above could apply the individual has to apply to HMRC to claim an exemption.
Other exemptions:
- Foster carers
- Those with no National Insurance Number
- Trustees, executors and administrators
- Non-resident companies
- Foreign businesses of non-UK domiciled individuals
Rachel Roberts is a Senior Tax Accountant and would be happy to chat through any queries or concerns you have on 01242 776000 or rachel.roberts@randall-payne.co.uk.
