Published: 07/05/2025 By Dean Clark
You may have heard that HMRCs new tax initiative Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) will begin rolling out from April 2026. It will initially apply to self-employed individuals and landlords with combined gross income (not profit) of £50,000 or more. Please note that gross income includes both self-employment and rental income.From April 2027, the threshold lowers to £30,000, bringing more taxpayers into scope. Then, in April 2028, it will further extend to individuals with qualifying gross income between £20,000 and £30,000.
Whether you need to comply with MTD ITSA from April 2026 will depend on the income reported in your personal tax return for the tax year ending 5th April 2025.
MTD ITSA - What does it mean?
Should you be obliged to comply with HMRC’s new legislative changes, (see qualifying income criteria highlighted above), the following will then be applicable to you:
1) Maintain digital records - All business transactions will need to be recorded digitally on HMRC compatible commercial digital software. (E.G. QuickBooks, Xero, Sage etc)
2) Submit four quarterly summaries - Four individual quarterly summaries of income and expenditure will need to be prepared and submitted to HMRC, via the digital software. However, no tax adjustments are required at this stage, it is purely based on income received and expenses paid.
3) Submit an annual personal tax return - After the fourth and final quarterly summary has been submitted to HMRC, the actual personal tax return will be prepared (as normal), using the self-employed and/or rental figures, as per the quarterly summaries submitted, along with any other relevant information as per your completed income tax questionnaire.
Please note, at this stage, individuals are still only required to make tax payments on the 31st January and 31st July each year, although changes to the tax payments dates, and frequency, are expected to follow in due course.
What about Penalties?
The penalties for individuals who do not comply with MTD ITSA have not yet been confirmed, however we will keep you informed of any changes, or updates once announced.
If you would like any further information on MTD please do not hesitate to get in touch, we are here to guide you every step of the way.
Email bsg@turpinba.co.uk or call 020 8661 7878