Some important changes are coming into effect from 6 April 2026. The new Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) regime will be introduced for those with self-employment and/or rental income over £50,000, and it will impact how you manage your tax affairs.
Under the new MTD for ITSA regime, you will be required to keep digital records and submit quarterly updates to HMRC using compatible software. This change aims to make the tax process more efficient and streamlined, but it will be a big change for some people, in particular those who have never used a software in this way before.
From conversations with clients and software providers so far, here are the “Frequently Asked Questions” we have encountered:
What is Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA)?
MTD for ITSA is a new regime introduced by HMRC that requires sole traders with self-employment and/or rental income over £50,000 to keep digital records and submit quarterly updates to HMRC using compatible software.
When will MTD for ITSA come into effect? MTD for ITSA will be introduced from 6 April 2026 for those with qualifying income over £50,000. From 6 April 2027 the limit drops to £30,000, and from 6 April 2028 to £20,000.
What are the main requirements under MTD for ITSA?
Under MTD for ITSA, sole traders and landlords will need to:
- Keep digital records of their income and expenses.
- Submit quarterly updates to HMRC using MTD-compatible software.
- Submit an annual tax return that includes information from the quarterly updates.
Will I need to complete four tax returns a year? No, MTD for ITSA will require sole traders and landlords to send quarterly updates of their self-employment and property income and expenses to HMRC. At the end of the year, your annual tax return still needs to be prepared and submitted.
Will I need to make quarterly payments? No. HMRC is not changing how payments of tax are collected. The January and July Payments on Account will remain in place.
Will I need to keep extra records? Additional records are not necessarily needed compared to traditional Self Assessment, but these records do now need to be kept digitally, using MTD for ITSA compatible software.
What does this mean for my record keeping?
- If you are currently using a software for your business, such as Quickbooks or Xero, then it is likely that little will change in your processes, other than submitting the quarterly return after ensuring your records are up to date. If we currently manage your bookkeeping, then we will be asking for your records on a monthly basis to keep your software current.
- If you are currently using a spreadsheet for your record keeping, then “bridging” software will be available
- If your records are currently manual, then you will need to implement a software solution.
Can Morris Owen help? Absolutely! We are ready to provide any assistance you require, whether that’s a chat about the process, initial set up and training on software, or a fully managed preparation and submission service.