What Is MTD ITSA, and How Will it Affect Self-Employed Individuals?

What Is MTD ITSA, and How Will it Affect Self-Employed Individuals?

Making Tax Digital for Income Tax Self-Assessment (MTD ITSA)


A major change in the way self-employed individuals and landlords in the UK manage and report their taxes. It’s part of the government’s initiative to modernise the tax system, making it more efficient and less error-prone.


If you’re self-employed, this change will likely affect how you record your income and submit your tax returns.


Let’s explore MTD ITSA, its impact on you, and the steps you need to take to ensure compliance.


What is MTD ITSA?


It’s an extension of the government’s Making Tax Digital (MTD) initiative, which already applies to VAT.


MTD ITSA focuses on streamlining the process of reporting income tax for:

  • Self-employed individuals.
  • Landlords with annual rental income.


Under MTD ITSA, you’ll need to:

  1. Keep digital records of your income and expenses.
  2. Submit quarterly updates to HMRC through MTD-compatible software.
  3. File an End of Period Statement (EOPS) and a Final Declaration to confirm your annual income and tax obligations.


Who Does MTD ITSA Apply To?
  • Self-employed individuals and landlords with an annual business or property income exceeding £50,000 starting from April 2026.
  • Those with income between £30,000 and £50,000 starting from April 2027.


HMRC is still consulting on how MTD ITSA will apply to individuals earning below £30,000 annually, but it’s important to stay informed about future changes.


How Will MTD ITSA Affect You?


1.Digital Record-Keeping

If you’re used to keeping paper records or spreadsheets, you’ll need to switch to MTD-compatible software to maintain your records digitally.


2.Quarterly Reporting

Instead of filing a single Self-Assessment tax return once a year, you’ll submit four quarterly updates to HMRC. These updates provide a snapshot of your income and expenses throughout the year.


3.End of Year Submissions

You’ll still need to finalise your accounts at the end of the year, but digital tools will streamline the process.


4.Increased Transparency

With regular updates, you’ll have a clearer picture of your tax obligations throughout the year, reducing the risk of surprises at year-end.


What Do You Need to Do to Prepare for MTD ITSA?


1.Determine If MTD ITSA Applies to You

Check your annual income from self-employment or property to see when you’ll need to comply with MTD ITSA.


2.Choose MTD-Compatible Software

Popular options like QuickBooks, Xero, and FreeAgent are all MTD-compatible. These tools help you maintain digital records and seamlessly submit quarterly updates.


3.Organise Your Records

Ensure your income and expense records are accurate and up to date. If you’ve been relying on paper receipts, it’s time to transition to a digital system.


4.Learn the New Process

Familiarise yourself with how to submit quarterly updates, End of Period Statements, and the Final Declaration.


5.Seek Professional Advice

Navigating MTD ITSA can be complex, especially if you’re new to digital accounting. A trusted accountant can guide you through the transition and ensure compliance.


How gHawk Accounting Can Help


We make your MTD ITSA transition smooth and stress-free.


Here’s how we can support you:


  1. Expert Guidance: We'll create a tailored compliance plan for your situation.
  2. Software Setup and Training: We'll set up your MTD software and train you to use it effectively.
  3. Quarterly Reporting Support: We'll handle your HMRC quarterly updates accurately and on time.
  4. Year-End Submissions: We'll manage all your year-end requirements while you focus on business.
  5. Ongoing Support: We're here to help with any MTD ITSA questions or issues.


Get Ready for MTD ITSA with gHawk Accounting


Don't face MTD ITSA alone. Contact us today.