Inform Accounting | MTD for ITSA

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) for Income Tax is being rolled out over the coming years for all sole traders, partnership members, property landlords and unincorporated business owners. It’s part of HMRC’s 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

combined total annual income of more than £50,000 will be impacted from April 2026, and those with combined total annual income of more than £30,000 will impacted from April 2027.

In the Chancellors Spring Statement 2025, it was announced that the MTD requirements will be extended to those earning over £20,000 starting April 2028. The extension of MTD for IT to general partnerships originally planned for April 2025 is awaiting 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.

MTD FOR ITSA: WHAT YOU NEED TO DO

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:

Keep digital financial records that are linked to HMRC’s systems
Update HMRC on business/property income and expenditure every three months
Ensure your accounting year is aligned to the tax year
Submit documentation such as End-of-Period Statements and Final Declarations
Pay any taxes due from the previous tax year by 31st January the following year

HOW CLOUD ACCOUNTING CAN HELP

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:

Flexibility: access key accounting information, and send quotes and invoices, at any time from anywhere you’re connected to the Internet

Automation: make time-consuming and repetitive tasks automatic, such as matching payments to invoices, to speed up processes and cut out human error

Security: robust protection in the cloud ensures that vital, sensitive data is frequently backed up and kept as safe as possible

Updates: automated updates to software means you’re always running the latest version, and accessing a full range of services and functions

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Next steps

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 IT. You will need to sign up by either April 6th 2026, April 6th 2027, or April 6th 2028 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.

We are currently working with our software partners and selected clients to trial different software solutions to see which suits our clients needs best.

MTD for Income Tax

What you need to do

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:

Keep digital financial records that are linked to HMRC’s systems
Update HMRC on business/property income and expenditure every three months
Ensure your accounting year is aligned to the tax year
Submit documentation such as End-of-Period Statements and Final Declarations
Pay any taxes due from the previous tax year by 31st January the following year

How Cloud Accounting can help

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:

Flexibility: access key accounting information, send quotes and invoices, at any time from anywhere you’re connected to the Internet

Automation: make time-consuming and repetitive tasks automatic, such as matching payments to invoices, to speed up processes and cut out human error

Security: robust protection in the cloud ensures that vital, sensitive data is frequently backed up and kept as safe as possible

Ebook