What is Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA)?
MTD for ITSA is a new way of reporting self-employed income and property to HMRC.
It’s a system that requires quarterly updates using software to keep digital records and send income tax updates.
From April 2026:
- Self-employed individuals and landlords with an income of more than £50,000 will need to keep digital records and provide quarterly updates of their income and expenditure to HMRC via the compatible software.
From April 2027:
- Self-employed individuals and landlords with an income between £30,000 – £50,000 will need to do the same.
Why has the launch been delayed?
Initially, MTD for ITSA was set to launch in April 2024, but now mandatory use of the software will be a phased process from 2026 with the government’s reason being that self-employed professionals and landlords are already facing a ‘challenging economic environment’.
This is news that will come as a great relief to all involved – just last month, the Chartered Institute of Taxation (CIOT) and the Association of Taxation Technicians (ATT) released a survey that highlighted widespread concerns surrounding the new requirement.
As a result of the findings, the CIOT and ATT recommended pausing the roll-out to allow time for further consultation.
The survey found that:
- 97% of respondents do not think that MTD for ITSA, in its current form, can be successfully introduced from April 2024.
- 94% of respondents are uncomfortable with the level of taxpayer awareness.
- 65% are uncomfortable about the availability of suitable software.
- Only 3% of respondents are comfortable about HMRC’s capacity and resources to support taxpayers and agents.
Interestingly, with regard to the costs and benefits of MTD for ITSA:
- 92% of respondents are uncomfortable about the cost to clients.
- 79% think that keeping digital records will be useful.
- 51% think that linking digital records will be useful.
- 36% think that quarterly reporting will be useful.
- 28% think that the quarterly tax estimate following the quarterly update will be useful.
Can I sign up now?
It is possible to start now – you just need to sign up through a recognised provider that will offer software compatible with MTD for ITSA.
HMRC is encouraging people to sign up voluntarily before the start date to help out with testing and developing the system before it becomes mandatory.
In order to voluntarily sign up, you’ll need to check that:
- Your details are kept up-to-date with HMRC
- You have a National Insurance number
- You’re a UK resident
- You’re already registered for self-assessment, have submitted at least one tax return; and you included either an existing self-employment income, a UK property income source or a foreign property income source in your last return
- Your accounting period runs from the 6th of April to the 5th of April
- You’re up-to-date with all your tax records with no outstanding tax liabilities.
The UK’s smaller sized businesses may also be interested to learn that the government will be carrying out a specific MTD for ITSA review into the needs of SMEs – particularly those under the £30,000 threshold.
It will look at how MTD for ITSA can be shaped in order to meet the needs of these smaller sized firms and find the best way for them to meet their income tax obligations.
If you need any further information, please call one of our friendly experts on 01442 795 100 or email email@example.com.