Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) will be one of the biggest changes to the self-assessment system since its introduction.
MTD was due to be phased in from April 2024, however, HMRC have announced some changes.
What has changed?
As mentioned above, MTD for ITSA was due to be phased in from April 2024. However, on 19 December 2022, the government announced a delay. In addition, the previously announced £10,000 threshold for self-employment and property income has been raised, as detailed below.
Under MTD for ITSA, self-employed individuals and landlords will be required to keep digital records and send a quarterly summary of their business income and expenditure to HMRC using MTD-compatible software. Then, at the end of the tax year an end of period statement (EOPS) and final declaration will also be required to be submitted.
From April 2026 – self-employed individuals and landlords with an income of more than £50,000 will be mandated to comply with MTD requirements.
From April 2027 – self-employed individuals and landlords with an income of between £30,000 and £50,000 will be mandated to comply.
Most individuals will be able to join voluntarily beforehand.
Who is affected by this?
All self-employed individuals and landlords with sales and/or rental income of over £30,000, unless HMRC agree you are digitally excluded.
It is important to note that the £30,000 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 £30,000 threshold.
MTD for ITSA compatible software
If you believe you will affected by these changes 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 Accounting Software.
Xero is 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.