What is MTD for Income Tax Self Assessment (ITSA)?
MTD for ITSA is part of HMRC’s initiative to modernize the tax system. It requires self-employed individuals and landlords to keep digital records of their income and expenses and submit quarterly updates to HMRC using MTD-compatible software.
When does MTD for ITSA come into effect?
MTD for ITSA will be mandatory from April 2026 for individuals with qualifying income over £50,000. From April 2027, it will apply to those with income over £30,0002.
Who needs to comply with MTD for ITSA?
Self-employed individuals, landlords, and partnerships with income above the specified thresholds will need to comply with MTD for ITSA.
What are the digital record-keeping requirements?
Businesses must keep digital records of all income and expenses. This includes using MTD-compatible software to record transactions and submit quarterly updates to HMRC.
Is there an exemption for digital exclusion?
Yes, there is a digital exclusion exemption for those who cannot use digital tools due to age, disability, or location. Applications for this exemption will open shortly before the first taxpayers are mandated from April 2026.
How is other income reported under MTD for ITSA?
Other income, such as employment, pension, or investment income, does not need to be reported quarterly. It is reported annually as part of the finalization process, similar to the current self-assessment tax return.
What software can be used for MTD for ITSA?
HMRC provides a list of MTD-compatible software products that can be used to keep digital records and submit updates. Businesses must use one of these approved software solutions.
What happens if I do not comply with MTD for ITSA?
Failure to comply with MTD for ITSA requirements may result in penalties from HMRC. It is important to ensure that you are using compatible software and submitting updates on time.
Can I still use paper records?
No, under MTD for ITSA, paper records are not acceptable. All records must be kept digitally using compatible software.
How can I prepare for MTD for ITSA?
To prepare, ensure you have MTD-compatible software, understand the digital record-keeping requirements, and stay informed about the deadlines and thresholds. If you need help, we are here, just reach out on +44 (0)330 024 3200.