Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA): What You Need to Know
In 2015, HMRC announced its intention to digitalise the UK tax system. The first phase, Making Tax Digital for VAT, was successfully implemented between 2019 and 2022. The next stage, MTD for Income Tax Self-Assessment (ITSA), will be introduced in phases:
- From April 2026: For individuals with qualifying income over £50,000 (based on the 2024–25 tax year).
- From April 2027: For those with qualifying income over £30,000 (based on the 2025–26 tax year).
- From April 2028 (subject to approval): Potentially extended to those with qualifying income over £20,000 (based on the 2026–27 tax year).
No date has yet been announced for partnerships to move to MTD ITSA but HMRC have said that a timeline will be set out for this at a later date.
What Does This Mean for You?
If you fall within the qualifying thresholds, you will be required to:
- Maintain digital records of your trading and/or property income.
- Submit quarterly updates to HMRC using MTD-compliant software.
- Submit your final ITSA return through the same software.
- Adhere to quarterly reporting deadlines (e.g. for the quarter ending 30 June/5 July, the deadline will be 7 August).
Late submissions will result in one penalty point being accrued for each filing deadline missed. Once you reach a certain points threshold, likely to be 4, you’ll receive a £200 fine in a system similar to VAT.
For many affected farming businesses, the biggest adjustment will be quarterly reporting. This is a significant shift from the current single annual submission. Sole trader businesses will need to ensure their records are kept up to date throughout the year.
This change may also alter the timing of when information is gathered for advisors such as accountants or bookkeepers, as deadlines will be much tighter.
Software Options
Most major accounting software providers including Xero, Sage, and QuickBooks are already MTD ITSA-ready. If you're currently using bridging software for VAT submissions, now is an ideal time to consider switching to a fully integrated digital accounting platform.
Top Tips
- Review your record-keeping processes to ensure they are fully digital.
- Identify all income streams to ensure quarterly updates are complete.
- Familiarise yourself with deadlines and reporting requirements.
- Ensure software is MTD-compliant.
- Plan with your accountants or consultants in advance, as quarterly deadlines may reduce the time available for advice.
As Xero Partners, we offer two tailored solutions, both with a 15% discount on Xero’s monthly subscription:
- Xero Setup & Training: We’ll help you set up your Xero account and provide training so you can manage your own bookkeeping and submit both your VAT and MTD ITSA returns confidently.
- Full Bookkeeping Service: Our team of AAT-qualified bookkeepers can manage your bookkeeping for you. Simply send us your paperwork each month, and we’ll handle everything, from linking your bank feed and HMRC account to submitting your VAT and MTD ITSA returns.
Useful Links
If you’re unsure whether these changes apply to you, we recommend speaking with your accountant.
Denise Scott, Agricultural Technician, Denise.Scott@sac.co.uk
Unearthed is the exclusive SAC Consulting members' monthly newsletter. Unearthed offers insights and tips from our experts on what we think is in store for farming and crofting in the coming months in order to protect and enhance your business.
Posted by Unearthed News on 15/09/2025
