When Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) was proposed back in 2015, it did not meet with the warmest of welcomes. To many business people, especially business owners and landlords, it was another way of having to deal with tax during a time that was already hard enough.

Forward to the present and the first phase of MTD for ITSA appears certain to begin in April 2026. Specifically, several of the following pieces of advice concern communal consultation do’s and don’ts for sole traders, freelance workers, or private landlords who currently file taxable income through the Self-assessment system. Below are 10 essential facts for MTD for ITSA.

When Will MTD for ITSA Be Introduced?

• The MTD for ITSA is due from 6 April 2026, affecting sole traders, freelancers and landlords with a gross trading or rental income above £50,000. Consequently compliance will be compulsory, and anyone who fails for those obligations will be penalized by fines.

• One year later, from the 6th of April 2027, the limit will be reduced to those with gross trading or rental income between £30,000 and £50,000.

• In the Autumn Budget 2024, the government also announced the reform of MTD for ITSA to business with gross trading or rental income between £20,000 to £30,000 by 6 April 2028. It is for this reason that this is done in a phased manner to try and ‘dampen’ the shock for the taxpayer.

How Will Reporting Change Under MTD for ITSA?

In the MTD for ITSA, the taxpayers will no longer complete an annual Self Assessment tax returns. Instead, they will:

• The financial records should be kept updated electronically.
• Furnish quarterly accounts detailing taxable turnover and Icons necessary to HMRC.
• Issue a statement at the end of that particular tax year to affirm the correctness of the stated amounts.

The change to real time reporting will introduce major alterations to the conventional tax filing procedures.

Digital Record-Keeping Requirements

New rules also require the use of MTD-compatible software for running accounts in order to adhere to the MTD for ITSA requirements. This might entail changing your accountancy software package totally, or employing a ‘bridge’ solution that will allow you to operate MTD-compliant with your existing programme.

Quarterly Reporting Deadlines

Under MTD for ITSA, taxpayers will need to submit quarterly updates to HMRC. These updates will:

• State the total of taxable income and expenses for the period.
• Help estimate the amount owed in tax by the taxpayers so that they can manage their budgets well.

The updates will be done on a quarterly basis and at the end of the year there will be a summary of the total income and expenditure for the given tax year. From these, the taxpayers can adjust their figures as per the current trends, and as a result, affix the signature of the taxpayer to the final declaration.

Improved Visibility of Tax Obligations

More transparency in computing taxes is one of the gains that comes with MTD for ITSA. This will mean you have a current approximation of your tax consideration let alone minimize randomly incurred taxes and plan your taxation appropriately.

Final Declaration Deadline

Individual taxpayers are required to file their declaration by the end of the following January in relation to the yards end. This declaration will ensure that all figures reported agree with reality and exclude the trivial details. Failure to meet deadlines or non-compliance with MTD means penalties would be incurred.

What If You Don’t Use Accounting Software?

If you are not already using accounting software you will need to start doing so to meet the requirements of MTD for ITSA. This may sound overwhelming, but a lot of the MTD compatible software are easy to use and don’t necessitate expert accounting knowledge. On the other hand, you could outsource the preparations of your records and reports using an accountant.

Benefits of Using Digital Accounting Software

• Automated record-keeping: You can link your bank account so that your budget instantly rel,ects any income and expenditure.
• Accurate reporting: Reduce mistakes and guarantee that all necessary requirements set by the HMRC complies with the company’s values.
• Improved cash flow management: Stay up to date on your business results and taxes in real time.
• Less stress during tax season: Get rid of the mad rush of preparing various documents supporting your financial status.

Potential Challenges of MTD for ITSA

While MTD for ITSA has its benefits, the transition won’t be without challenges:

• Cost: You may feel the bill rising up when buying an accounting software or seek professional assistance.
• Learning curve: Not to mention, adapting to a new instrument or in this case, software might take some time, particularly to a non-techie like me.
• Increased admin: This might not sit well with some social media users as they have to make several visits to your accounts for them to catch up with updates.

However, where there is adequate preparation and support, such difficulties are neither impossible to contend with.

How TVR Accountants Can Help

MTD for ITSA is just around the corner, and as a leading accounting firm in Bury St Edmunds we are here to help. We offer:

• MTD-compliant software recommendations: We will then assist you in making the correct decision for your intended platform.
• Expert advice: Our team regularly checks all rules and regulations provided by HMRC and make sure the client stays compliant.
• Support with digital record-keeping: Our services are tailored to meet your need of providing you with time to concentrate on aspects of the business you are best suited for leaving the accounts to us.
• Quarterly and annual reporting: Don’t worry; we will ensure the submission of updates and final declarations to HMRC on your side.

That is why we can help you to address MTD for ITSA without significant interruptions to your operations.

The introduction of MTD for ITSA is a major change in the way that the sole trader, freelancer, and landlords experience the tax system. Some of these changes may be overwhelming, people keep asking for better explanations in reference with better financial views and fewer shocks at the time of tax filing.

It’s important therefore to act proactively now so as to facilitate the transition towards digital reporting. From advising on appropriate software to use for MTD or helping with your accounts, TVR Accountants are with you all the way. Contact us today to learn how we can make MTD for ITSA easier for you to achieve compliance.