MTD – SA Lee Accountancy Ltd

The way self-employed individuals report their income to HMRC is changing. From April 2026, Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) will come into effect, meaning self-employed business owners and landlords earning over £50,000 will need to comply with new digital reporting requirements. If you fall into this category, now is the time to prepare.

What is MTD for ITSA?

Making Tax Digital (MTD) is an HMRC initiative designed to modernise the UK tax system by replacing annual Self Assessment tax returns with quarterly digital reporting. From April 2026, self-employed individuals and landlords earning over £50,000 will be required to:

• Keep digital records of income and expenses using compatible software

• Submit quarterly updates to HMRC instead of one annual return

• File an End of Period Statement (EOPS) and Final Declaration each year

This change aims to improve accuracy, reduce errors, and provide a clearer picture of your tax obligations throughout the year.

Who Will Be Affected?

• From April 2026, MTD for ITSA will apply to self-employed individuals and landlords earning over £50,000

• From April 2027, those earning between £30,000 and £50,000 will also be included

• General partnerships and businesses earning below £30,000 are not currently required to comply, though HMRC may expand the scheme in future

If you already use accounting software like QuickBooks, Xero, or FreeAgent, you may be in a strong position for a smooth transition. However, those relying on spreadsheets or manual records will need to switch to MTD-compatible software before the deadline.

Benefits and Challenges

The Pros:

• More accurate record-keeping reduces tax return mistakes

• Regular updates help manage cash flow and avoid unexpected tax bills

• Less paperwork at year-end, making tax admin easier

The Cons:

• Self-employed individuals will need to submit updates every three months instead of once a year

• Some will need to invest in new accounting software

• The transition may feel overwhelming for those used to manual methods

How to Prepare for MTD for ITSA

1. Review Your Current Record-Keeping – If you’re not using digital software, now is the time to explore MTD-compliant options.

2. Get to Know the Reporting Requirements – Understanding what you’ll need to submit and when will prevent last-minute stress.

3. Seek Professional Guidance – At SA Lee Accountancy Ltd, we can help you transition smoothly and ensure compliance with MTD regulations.

Need Help Getting Ready?

April 2026 might seem far away, but the earlier you prepare, the easier the transition will be. If you’re unsure how MTD for ITSA will affect your business, get in touch with us today. We can help you choose the right software, streamline your records, and ensure you stay compliant without added stress.

Making tax digital may seem daunting but it isn’t. Gone are the days where you could scribble your income and expenses on a piece of paper and submit your tax return. Luckily technology has evolved and has made it easy for us to log our accounts and even attach our receipts.

MTD applies to the self-employed and landlords. It is used to submit your records digitally rather than a manual process like it used to be. There is a lot of compatible software out there that supports the MTD function. QuickBooks being one of them which is very competitive in price (the equivalent to a couple of pints in the pub a month).

As of April 2024, all self-assessment tax returns must be submitted digitally which means there is plenty of time to get into the habit of doing it. Once the MTD is fully implemented you will be required to send over your business information quarterly, this will include all your income and expenditure.

At the end of the accounting period the accounts will be finalised and any adjustments that are required will be actioned and the final declaration will be sent over digitally. Your tax bill will be paid as normal on the 31^st January and the on-account payment on the 31^st July.

Clients will have the option of paying their tax on a quarterly basis, this may be beneficial as tax payments can be made more often which can help people budget and pay the tax in instalments rather than a lump sum.

In the long run MTD will be easier to use and will show a much more accurate picture of your profit or loss.

Please be aware that little accountancy knowledge can be dangerous. In my experience clients have categorised their costs wrong which has produced an incorrect tax liability. Please ensure that you appoint an accountant to finalise your self-assessment.

Please note, that all figures are correct at the time of writing