If you’re self-employed or a landlord in the UK, there are some major changes on the horizon when it comes to how you’ll file your tax returns. Starting from April 2026, the Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) initiative will bring a shift in how tax information is submitted to HMRC. The goal? To make tax reporting more efficient and less error-prone. But for many, this will mean a whole new way of managing their finances.
In this blog, we’ll explain everything you need to know about MTD for ITSA, how it’s going to work, and what you need to do to prepare. Whether you’re a seasoned self-employed professional or a landlord with a few properties under your belt, staying compliant with the new rules is crucial for avoiding fines and making sure you stay on the right side of HMRC.
- What Is Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA)?
MTD for ITSA is the next step in the UK government’s Making Tax Digital (MTD) initiative, which is designed to digitise and modernise the tax system. While MTD has already been rolled out for VAT-registered businesses, MTD for ITSA focuses on self-employed individuals and landlords whose annual income exceeds £50,000 (dropping to £30,000 from April 2027).
Under the new system, instead of filing an annual tax return as you do now, you’ll need to keep digital records and submit updates to HMRC quarterly via compatible accounting software. This means your tax returns will no longer be a once-a-year event but an ongoing process throughout the year.
- Who Does MTD for ITSA Affect?
MTD for ITSA will impact all self-employed individuals and landlords who meet the income threshold. This includes:
- Self-employed individuals (sole traders) with gross income over £50,000 from their business.
- Landlords earning more than £50,000 annually from property rental income.
If your income is below the threshold, you won’t be required to join MTD for ITSA just yet. However, it’s expected that more individuals and businesses will be included as the system rolls out further.
- How Will MTD for ITSA Work?
The key change under Making Tax Digital for ITSA is the move from an annual tax return to quarterly submissions. Here’s a breakdown of how it will work:
Digital Record-Keeping
The days of managing your accounts with spreadsheets or paper records are numbered. Under MTD for ITSA, you’ll need to use HMRC-approved software to keep digital records of your income and expenses. This software will help you stay organised and ensure that your data is accurate, reducing the likelihood of errors in your submissions.
Quarterly Updates
Every three months, you’ll need to submit a summary of your income and expenses to HMRC. These quarterly updates will give HMRC an idea of your trading position throughout the year, rather than waiting until the end of the tax year to see how much tax is owed.
End-of-Period Statement (EOPS)
After the fourth quarterly submission, you’ll need to submit an End-of-Period Statement (EOPS). This is essentially a final report for the year, where you can make any adjustments and declare that the information you’ve provided is accurate and complete.
Final Declaration
Finally, you’ll submit a Final Declaration, which replaces the current Self Assessment tax return. This is when you confirm the total income and tax due for the year. You’ll also make any claims for reliefs or allowances at this point.
By spreading out your submissions over the year, MTD for ITSA aims to make it easier for businesses to manage their tax obligations and avoid surprises at the end of the year.
- What Are the Benefits of Making Tax Digital for the Self-Employed?
While moving to quarterly updates and digital record-keeping might sound like extra work, MTD for ITSA also brings several benefits for the self-employed and landlords.
Reduced Errors and Better Accuracy
Using approved accounting software reduces the risk of errors that can occur with manual record-keeping. The software can automatically track income and expenses, flag issues, and even suggest tax deductions you might otherwise miss. This means you’ll have a more accurate picture of your finances throughout the year.
Avoiding Last-Minute Tax Panics
We all know how stressful it can be to scramble at the end of the year to file a tax return. With quarterly submissions, you’re staying on top of your finances throughout the year. This means no more last-minute panic in January and less risk of missing deadlines, which can result in fines.
Better Cash Flow Management
One of the key benefits of MTD for the self-employed is improved cash flow management. Because you’ll be submitting quarterly updates, you’ll have a clearer picture of how much tax you owe throughout the year. This allows you to budget and plan more effectively, reducing the risk of facing a big tax bill all at once.
HMRC Guidance and Support
As part of the MTD initiative, HMRC is providing guidance and support to help businesses transition smoothly. Approved software solutions also come with built-in help, making it easier for you to stay compliant and on track.
- How to Prepare for MTD for ITSA
The changes under MTD for the self-employed and landlords might feel overwhelming, but by preparing early, you can ensure a smooth transition. Here are the steps you should take now to get ready:
- Choose the Right Accounting Software
You’ll need to use MTD-compatible software to keep digital records and submit your quarterly updates. If you’re not already using accounting software, now is the time to switch. Platforms like Xero, QuickBooks, and FreeAgent are popular choices that integrate seamlessly with MTD.
- Keep Digital Records from Now
Even if MTD for ITSA doesn’t affect you until 2026, it’s a good idea to start keeping digital records now. This will help you get into the habit and ensure that you’re ready when the time comes. Most accounting software makes it easy to scan receipts, log expenses, and track income with just a few clicks.
- Talk to Your Accountant
If you’re unsure about how MTD for ITSA will impact you, or if you need help choosing the right software, speak to your accountant. They can provide expert advice on how to stay compliant and make the most of the changes. Plus, they’ll ensure that you’re taking advantage of any tax-saving opportunities.
- Get Familiar with Deadlines
Under MTD for ITSA, you’ll have new deadlines for submitting quarterly updates and your End-of-Period Statement. Mark these dates in your calendar and plan ahead so that you don’t miss any.
Speak to Our Experts About MTD for ITSA
The upcoming changes under MTD for ITSA are significant, but with the right preparation, you can stay compliant and even benefit from the new system. At Keirstone, we specialise in helping self-employed individuals and landlords navigate the complexities of MTD for ITSA. From choosing the right software to managing your submissions, we’re here to make your transition as smooth as possible.
Schedule a call with us today to get expert advice on how to prepare for MTD and ensure that your tax reporting is stress-free!
The shift to MTD for the self-employed and landlords is a big one, but by taking the time to understand how it works and preparing now, you can ensure that your business or property management runs smoothly under the new rules. Don’t wait—start getting ready today!