Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) Factsheet
🔍 What is MTD ITSA?
Making Tax Digital for Income Self-Assessment (MTD ITSA) is part of HMRC’s digital strategy to streamline the tax process and improve accuracy for individuals and businesses.
The key requirement of MTD ITSA is that certain self-employed individuals and landlords will have to:
- Keep digital records of income and expenditure which must include a date, a category (expense type), and an amount.
- Submit quarterly updates to HMRC via HMRC approved software (either bridging software to your digital records or full bookkeeping software).
📊 Who Does It Apply To?
MTD ITSA currently applies to:
- Self-employed individuals earning over certain thresholds.
- Landlords earning property income from UK or overseas over certain thresholds.
N.B MTD ITSA does not currently apply where profits are declared on a Partnership return.
✅ What is the threshold?
You will be mandated to join MTD ITSA if your combined business and/or property income exceeds:
- £50,000 in 2024/25 mandated from April 2026.
- £30,000 in 2025/26 mandated from April 2027.
- £20,000 in 2026/27 mandated from April 2028.
If your total qualifying income remains below these thresholds, you are not required to sign up for MTD ITSA, but you can choose to voluntarily adopt it.
All submissions must be made using HMRC-approved MTD-compatible bookkeeping or bridging software.
🔍Could I be exempt?
You can apply to HMRC for an exemption if it is not reasonably practical for you to comply with MTD requirements due to "digital exclusion".
Acceptable reasons for digital exclusion include limitations based on age, health, or disability that prevent computer use, lack of reliable internet access at home or work, or being a member of a religious society, whose beliefs preclude electronic communication and record-keeping. To apply for a digital exclusion HMRC will need to be contacted, so if you think this applies to you, please let us know. For further information on this and how to apply, please see the link below.
📈 Going Over the Threshold: What are your options?
If your income goes over the threshold, there are three options available to you as our client:
Option 1: Submit the quarterly update yourself through MTD compliant software.
With this option you will need to select your preferred software and keep digital records in order to complete your submissions on a quarterly basis for June, September, December, and March each year. This should be via HMRC approved MTD full bookkeeping software or digital records can be kept in excel etc and HMRC approved bridging software used. For further details please see below.
Option 2: Complete an income and expenditure template provided by us and we will submit the quarterly update on your behalf.
This option means that you do not need to purchase MTD compatible software, but you will still need to keep digital records (such as excel records). We will provide you with a template and guidance on how to fill it in, then on a quarterly basis you will need to input the necessary summarised income and expenditure information into the template and send it to us along with your supporting digital reports for our records. A basic level of Microsoft excel knowledge would be necessary.
Once we receive the completed template, we will perform a high-level sense check of the information to check for anomalies and then submit this to HMRC on your behalf. We will then ratify the information and provide any feedback for improvements at the end of the year when we complete our calculations and prepare your End of year Tax Return (previously referred to as a Self-Assessment Tax return). Please get in touch for a quote if this option is of interest to you.
Option 3: Send us your books and records and we will complete your digital records (bookkeeping), prepare and then submit the quarterly update on your behalf.
This will be a full service taking much of the burden of MTD submissions away from you. You will be required to send us the relevant income and expenditure information on a monthly or quarterly basis as agreed between us, we will then complete your bookkeeping in an MTD compliant format (digital records) and prepare the quarterly update. We will send this to you for approval before submission to HMRC.
This service will be priced on application. We will base the fee on the estimated amount of time to complete the bookkeeping, which can vary widely due to the volume of transactions and complexity of the business/trade. The quarterly charge will be based on an hourly rate for bookkeeping. Please get in touch for a quote if this option is of interest to you.
1. How to enrol with HMRC for MTD ITSA
This can be done by following the link below, alternatively we can do this for you irrespective of which option you choose:
https://www.gov.uk/guidance/sign-up-your-business-for-making-tax-digital-for-income-tax
Please remember to let us know once you have enrolled for MTD ITSA.
2. Types of software
There are two types of MTD compliant software to choose from:
- Complete cloud based bookkeeping packages (such as QuickBooks, Xero etc) in which you will keep your digital records and make your submissions to HMRC.
- Bridging software that connects to your digital records (such as excel) and will let you send quarterly updates directly to HMRC.
For the most up to date information and guidance please visit the HMRC website using the link below:
https://www.gov.uk/guidance/find-software-thats-compatible-with-making-tax-digital-for-income-tax
HMRC also have a useful software finder tool to help you find the right software for you, please use the link below to access the tool:
https://www.gov.uk/guidance/find-software-that-works-with-making-tax-digital-for-income-tax
