Making Tax Digital for Income Tax Self Assessment

What is Making Tax Digital for Income Tax Self Assessment?

Making Tax Digital for Income Tax Self Assessment (or MTD for ITSA for short) will mean landlords and self-employed individuals will be required to keep digital records of income and expenditure relating to their rental properties and businesses. At a minimum, digital records should consist of dates, amounts and category of income or expenditure.

On a quarterly basis, these records will need submitting digitally to HMRC as follows:-

*You can elect to use the month end e.g. 30 June rather than 5 July but the deadline for submission remains the same.

After the fourth and final quarter has been filed, the taxpayer will still need to submit a “digital tax return”, which will be very similar to the usual tax return but the rental property and business details will effectively be pre-populated from the quarterly submission and will then just need to be adjusted for accounting and tax purposes (for example for disallowable private use or claiming for capital expenditure). You will add in/verify other non-MTD items such as bank interest, PAYE income and investment income etc.

Tax payment deadlines remain unchanged at this stage (due by 31 January following the end of the tax year and 31 July if payments on account are required).

When will it affect you?

This depends on your qualifying income (gross income) from rental properties and/or self-employment:-

• If gross income is over £50k in 2024/25 then you will fall into MTD for ITSA from 6 April 2026
• If gross income is over £30k in 2025/26 then you will fall into MTD for ITSA from 6 April 2027
• If gross income is over £20k then you will fall into MTD for ITSA by the end of this Parliament (date to be confirmed)

Note these tests are based on gross income/turnover and not profit.

You can choose to follow MTD rules voluntarily if you want to do, even if you are not legally required to do so.

Things you can do now to get ready for MTD for ITSA

• Consider technologies available and software options for keeping digital records
• Separate bank accounts for business/personal making it easier to record/extract relevant information
• Regularly updating your accounting records (e.g. on a daily/weekly/monthly basis)
• Consider aligning VAT quarters if VAT registered
• Speak to a member of the tax team to discuss your options

What Simpson Wood are doing in preparation for MTD for ITSA

• Identified clients likely to be affected by MTD
• Communicate with clients as part of the 2025 tax season
• Signed up test clients for the HMRC BETA testing during 2025/26 tax year
• Researching solutions for all scenarios when it comes to software and filings with HMRC – attending seminars, events with providers
• Quantifying additional work involved for both us as agent and our clients and associated costs

MTD for ITSA is going to be a big change but Simpson Wood aim to make this transition as smooth as possible for our clients. Please feel free to get in touch with a member of our tax team if you wish to discuss further.