MTD for Income Tax Self-Assessment (MTD for ITSA) will change how millions of business owners and landlords report their earnings to HMRC.

The Government has recently announced its 2nd phased mandate of Making Tax Digital for ITSA (MTD for ITSA).

The story so far

Making Tax Digital is a government initiative aiming to create one of the most digitally advanced tax administrations globally. Moreover, it seeks to make tax administration easier for taxpayers. The first stage, MTD for VAT, began in 2019. Initially, certain VAT-registered businesses had to keep digital records and use MTD-compatible software for electronic VAT returns. However, on 1st April 2022, the scope expanded. Now, all VAT-registered businesses must follow these rules.

Furthermore, business owners and landlords won’t file an annual self-assessment tax return unless exempt from MTD for ITSA. Under MTD, taxpayers must keep digital records, submit quarterly reports to HMRC, and complete a year-end reconciliation and update, similar to the current self-assessment.

Preparing for MTD for ITSA

Regardless of your tax year, your digital start date is 6th April 2026. Although this seems distant, it’s beneficial to prepare early. Furthermore, voluntarily signing up helps you get accustomed to MTD rules. Therefore, check your eligibility for early MTD for ITSA registration here or consult your accountant or bookkeeper. Additionally, if you own multiple businesses, the combined income counts towards the £30,000-£50,000 threshold.

If you’re a self-employed business owner and landlord affected by MTD for Income Tax, from 6th April 2024, you’ll need to:

- Keep digital records of income and expenses.
- Send quarterly updates to HMRC..
- Submit an end-of-period statement and final declaration.
- Use accounting software for real-time records.
Under MTD for Income Tax, start maintaining digital records of all business income and expenses now to prepare adequately.

Sending quarterly updates

Deadlines for submitting quarterly updates are consistent for everyone under MTD rules. From the start of the tax year on 6th April, the deadlines are:

– August 5th
– November 5th
– February 5th
– May 5th

Quarterly updates are due one month after each quarter ends. Additionally, income tax payment dates remain unchanged.

At the end of the tax year, you’ll need to finalize your business income by completing an end-of-period statement (EOPS) for each source of income and a final declaration that replaces the current Self-Assessment tax return.