Making Tax Digital (MTD) for the self-employed and landlords was due to become mandatory on 6 April 2024. But, on 19 December 2022, HMRC announced that this will now be pushed back to 2026. If you earn £50,000 annually from business and property, you’ll need to sign up ahead of the deadline.
VAT registered businesses will already be familiar with MTD rules. From April 2022, MTD rules became mandatory for all VAT-registered businesses.
What does Making Tax Digital mean for the self-employed and landlords?
Unincorporated businesses and landlords with an overall income above £50,000 need to have MTD for ITSA compatible software in place before 6 April 2026. This is when Making Tax Digital for Income Tax Self-Assessment (ITSA) comes into effect.
For the self-employed and landlords earning above £30,000 annually, MTD for ITSA will start from April 2027.
Instead of using HMRC’s website to file returns, you’ll need to keep digital records and use compatible software. From 6 April 2026, you’ll need to submit quarterly updates to HMRC, as well as an End of Period Statement (EOPS) at the end of your fourth quarter, and a final declaration that includes all other taxable income by 31 January every year.
When is the deadline for MTD for ITSA?
Those who follow the tax year will have a digital start date of 6 April 2026. If you don’t follow the tax year, your digital start date is the day your accounting period begins, which will fall on or after 6 April 2026.
Do all self-employed people and landlords have to go digital?
If you meet the criteria then you must comply with MTD for ITSA, unless you’re digitally exempt.
All self-employed people and landlords with a total income (from business or property) above £50,000 will need to follow MTD rules for ITSA from 6 April 2026 (all those earning above £30,000 from 6 April 2027). Those earning below this threshold can continue to use the old HMRC system for filing their returns.
If you own multiple businesses, the income earned from all of them contributes to the £50,000 threshold.
What do I need to submit for MTD for ITSA?
There are three parts you’ll need to submit for MTD for ITSA:
- Quarterly updates. These should include all business/property income and expenditure.
- End of Period Statement (EOPS). You’ll need to submit one of these per year, for each source of income.
- Final declaration. This is where you’ll need to share details of all other taxable income, including investments and savings interest.
Can an accountant help me?
Yes. Speak to your accountant about signing up for MTD for ITSA early, so you have plenty of time to familiarise yourself with the system. Your accountant can also submit your quarterly updates, EOPS and final declarations for you.
How do I calculate income for MTD for ITSA?
All property and business income contributes to the £50,000 threshold. For example, if you’re a freelancer earning £40,000 per year from your business, and £20,000 per year from property, you’ll be above the threshold and will therefore need to comply with MTD for ITSA. If you have multiple businesses or sources of property income, you need to add up the income from all of them to work out whether you’re above the threshold.
What software can I use?
Using ITSA compatible software will enable businesses and landlords to keep digital records of income and expenses and submit their quarterly updates and annual submissions directly from the platform.
Look for software with additional features that reduce the administrative burden of digital recordkeeping, like invoicing and expense capture.
Can I use spreadsheets for MTD?
Yes, bridging software is available so that excel spreadsheets can be converted into a digital format for filing MTD returns.
Do I need to sign up for MTD for VAT and MTD for ITSA separately?
Yes. The systems are separate, so you may need to sign up for both. Some will need to sign up for MTD for VAT and MTD for ITSA, whereas others will only need to sign up for MTD for ITSA.
Are there any benefits to the changes in Self-Assessment under MTD for ITSA?
Once you’ve got your head around sending updates more often you may find the new system easier than before as you’re only submitting a quarter’s worth of information at a time rather than a whole year.
Your quarterly updates also provide a near-real-time view of your finances, giving you a clearer picture of how your business is doing. Also, HMRC can send an estimation of how much tax you owe which can help you prepare for your tax bill ahead of time. According to HMRC, those who are already using MTD for VAT have seen benefits to using it.
How should I prepare for MTD for ITSA?
Make sure you have MTD for Income Tax compatible software in place, and you’re signed up to MTD for ITSA before 6 April 2026.
Talk to your accountant about signing up for MTD for ITSA. The more time you spend getting used to new digital tools, the easier you’ll find the transition to Making Tax Digital.
At BPC, we have successfully moved all of our VAT registered businesses onto Making tax Digital and we’re ready to move onto the next phase for Self-Assessment. Contact us or click on the chat so that we can help you prepare for Making tax Digital.
At BPC, we have successfully moved all of our VAT registered businesses onto Making tax Digital and we’re ready to move onto the next phase for Self-Assessment. Contact us or click on the chat so that we can help you prepare for Making tax Digital.
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