MTD for ITSA, landlords and sole traders

Making Tax Digital for ITSA the latest for Landlords and Sole Traders

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) mandates that qualifying businesses and landlords must maintain digital records and update HMRC every quarter using compatible software. Originally intended to come in from 2024 it has been pushed back until 2026 but new announcements have just come out regarding an extension to MTD to smaller businesses.

Who will this MTD extension impact?

The extension of Making Tax Digital set out by HMRC will impact upon Landlords and self-employed individuals earning business or property income exceeding £30,000 (that’s turnover not profit). Previously it was just expected to

How will this extension of MTD work?

For individuals, Making Tax Digital for ITSA will roll out in two phases:
– Starting from April 2026, for those with qualifying income exceeding £50,000.
– From April 2027, for those with qualifying income surpassing £30,000.

The government aims to extend MTD further for ITSA to partnerships in the near future, but there’s no set date yet.

What are HMRC’s objectives in this extension of MTD for ITSA?

MTD leverages digitalisation to facilitate more accurate tax reporting. The idea being there would be fewer input errors as figures have to be automatically populated in the MTD returns from the software so they are only entered once. Many countries have already adopted digital systems to streamline tax processes, aiming to minimise errors and enhance productivity.

Tax discrepancies contribute to the tax gap which is currently estimated at £5 billion for Self-Assessment businesses. Utilising digital tools for record-keeping and updates reduces errors, saves time, and supports business productivity.

Digitising services offers customer benefits such as:

– Decreasing the risk of unintentional errors.
– Saving time during tax return submissions.
– Boosting productivity and reducing paperwork through digital tools.
– Enabling HMRC to tailor services more effectively.

What is the background to MTD for ITSA?

MTD for ITSA is a pivotal aspect of HMRC’s modernisation efforts to improve tax handling for small businesses and reduce tax losses due to errors.

Initially proposed in Budget 2015, MTD was formally consulted upon in 2016, with the first phase implemented for VAT-registered businesses from April 2019.

Building on the success of MTD for VAT, the government announced in December 2022 the extension of MTD for ITSA to businesses, self-employed individuals, and landlords earning over £50,000 from April 2026, and those with earnings over £30,000 from April 2027.

In Autumn Statement 2023, the government released the ‘Making Tax Digital Small Business Review Outcome’, outlining how MTD for ITSA caters to smaller businesses’ needs. Simultaneously, new simplifications were introduced to minimize burdens and streamline processes.

From April 6, 2026 what must businesses, self-employed individuals, and landlords do?

-They must operate MTD if their total qualifying income from trading and property exceeds £50,000; and
– Starting from April 6, 2027, they must operate MTD if their total qualifying income surpasses £30,000.

They must also:

– Maintain digital records.
– Provide quarterly digital updates.
– Submit ITSA return information to HMRC through MTD-compatible software.

If you are a property Landlord or are self-employed and you would like help with MTD for ITSA we already have solutions in place that we can discuss with you ahead of time.  Please contact us or telephone us on 020 7870 9050

Contact us

Talk to us

We’re here to help and nothing helps more than a one-to-one conversation. Let’s talk today to find out how we can make your business and your life run more smoothly.

ICAEW logo
xero logo
Parker Russell International logo
Quickbooks logo