Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is a significant shift in how self-employed individuals and landlords manage their taxes. It’s HMRC’s drive to modernise the tax system, and it’s essential to be prepared. This FAQ from HMS Accounting covers everything you need to know:
1. What is MTD ITSA?
MTD ITSA 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. This replaces the traditional annual Self Assessment tax return for income tax.
2. Who does MTD ITSA apply to?
MTD ITSA applies to:
- Self-employed individuals and landlords with annual business or property income exceeding £50,000 from April 2026.
- Those earning between £30,000 and £50,000 will need to comply from April 2027.
- Future plans for individuals earning below £30,000 are still under consultation.
3. When does MTD ITSA start?
- April 2026: For individuals earning over £50,000 annually.
- April 2027: For individuals earning between £30,000 and £50,000 annually.
4. What records do I need to keep digitally?
You’ll need to maintain digital records of:
- Income
- Expenses
- Bank transactions related to your business or property
These records must be stored in MTD-compatible software and submitted to HMRC via quarterly updates.
5. How often do I need to report under MTD ITSA?
You will need to submit:
- Four quarterly updates summarising your income and expenses throughout the year.
- An End of Period Statement (EOPS) at the end of the tax year to confirm your figures.
- A Final Declaration to declare all your income and confirm your tax liability.
6. What software do I need for MTD ITSA?
You will need MTD-compatible software to manage your records and submit updates. Popular options include:
- QuickBooks
- Xero
- FreeAgent
HMS Accounting can help you choose the best software for your needs and set it up for you.
7. What happens if I don’t comply with MTD ITSA?
Failure to comply with MTD ITSA requirements may result in penalties from HMRC. These could include fines for late submissions or non-compliance with digital record-keeping rules.
8. Do I still need to file a Self Assessment tax return?
No, MTD ITSA replaces the traditional annual Self Assessment tax return. Instead, you’ll submit quarterly updates, an EOPS, and a Final Declaration through your MTD-compatible software.
9. How can HMS Accounting help me with MTD ITSA?
We provide:
- Expert advice tailored to your situation.
- Setup and training for MTD-compatible software.
- Assistance with quarterly updates and year-end submissions.
- Ongoing support to ensure compliance and peace of mind.
10. What should I do now to prepare for MTD ITSA?
- Determine when MTD ITSA will apply to you based on your income.
- Choose and set up MTD-compatible software.
- Organise your records to ensure accuracy.
- Seek professional advice to streamline the transition.
Still Have Questions? We are here to help.
Contact HMS Accounting today for a consultation. We can help you navigate the complexities of MTD ITSA and ensure you’re ready for the changes. Don’t wait until the last minute – get prepared now.
