If you currently submit your tax returns under the self-assessment system every year, then the way you declare your tax information is about to fundamentally change.
Making Tax Digital (MTD) is being rolled out over the coming years for all sole traders, partnership members, property landlords and unincorporated business owners. It’s part of HM Revenue and Customs’ drive to make the British tax administration a world leader in digital innovation so that it can be more effective, more efficient, and easier for taxpayers to get right.
Sole traders, unincorporated businesses and property landlords with
total annual income of more than £50,000 will be impacted from April 2026, and those with total annual income of more than £30,000 will impacted from April 2027.
The government is expected to review the needs of those with income under £30,000 before deciding on any further mandation of MTD for ITSA. The extension of MTD for ITSA to general partnerships originally planned for April 2025 was also scrapped, with a new timeline yet to be announced.
MTD represents a major change for many individuals and organisations. Now is the time to start preparing, so that you can transition smoothly and stay compliant.
There is no automatic switch over from Self Assessment to MTD for Income Tax, so your first step, if affected by the changes, will be to sign up for MTD for ITSA. You will need to sign up by either April 6th 2026 or April 6th 2027, depending on which income threshold you fall under.
The next step will be to choose which cloud accounting platform solution you want to work with. Many providers like Xero, Quickbooks and FreeAgent are in the process of building and testing their solutions, so software may not yet be available. But don't let this stop you from having a look, or speaking to us about which solution may suit your business best.
The new MTD-based system places several new requirements for those involved, starting with registration for the new scheme with HMRC. You will be required to:
Using cloud accounting software is the easiest way to navigate all the challenges that MTD poses. It’s important to ensure that the software you use is MTD-compatible, or can be integrated with bridging software that can make the quarterly submissions required.
But by making the step into the cloud now, you can realise all the benefits of the software straight away, including:
Need help setting and achieving your goals? The KPIs listed in this guide will help provide the insight you need to keep your business growing. We can help you set your targets, track your data and report back through the provision of management accounts - a monthly or quarterly set of statements that put you firmly in control of your finances.
At Inform Accounting, what we do is about so much more than making money and helping our clients manage theirs.