The UK’s tax landscape is undergoing a significant transformation with Making Tax Digital for Income Tax Self Assessment (MTD for ITSA). As part of HMRC’s broader Making Tax Digital initiative, MTD for ITSA will start in mandatory phases from April 2026. At AIT Accountants, we’re committed to guiding UK businesses through these key changes. This comprehensive guide will explore what these changes mean for your business, focusing on the phased implementation, key requirements, and how to prepare.
Phases of MTD for ITSA
Phase 1: April 2026
In April 2026, the first phase will begin, affecting self-employed individuals and landlords with turnovers over £50,000. They must maintain digital records and use compatible software to submit tax information. This phase marks a critical step in modernising the tax system, aligning it with the digital age.
Phase 2: April 2027
The next phase starts in April 2027, extending to those with a turnover over £30,000. The requirements will mirror Phase 1, and there are ongoing talks about including those who turnover under £30,000. This phase continues the government’s commitment to streamlining tax reporting and making it more efficient.
The government is actively reviewing the needs of smaller businesses, with a focus on those with turnover under £30,000. Future phases may include general partnerships and other entities, further expanding the reach of MTD for ITSA.
Key Requirements and Exemptions
Businesses must keep digital records of income and expenses and submit tax information quarterly using MTD compatible software. This shift towards digital record-keeping is designed to reduce errors and make tax management more straightforward.
Exemptions are available for those who cannot use software or submit data digitally due to location, age, or other justifiable reasons. These exemptions ensure that the system remains accessible and fair to all taxpayers.
How to Prepare for MTD for ITSA
Choose the Right Software
Selecting MTD compatible software that fits your business needs is the first step. Research various options, consider features, and consult with professionals to make an informed decision.
Understand the Deadlines
Familiarise yourself with the quarterly deadlines and end-of-year statement requirements. Creating a timeline can help you stay on track and avoid penalties.
Seek Professional Guidance
Consulting experts like AIT Accountants can ensure a smooth transition and compliance with MTD for ITSA. Our team of professionals is here to provide personalised guidance tailored to your business needs. Get in touch with us, email us at email@example.com.