Making Tax Digital for Income Tax
MTD Services
- MTD for ITSA starts in April 2026 for those earning >£50k from self-employment and rental income (combined)—others will follow in 2027 and 2028
- Affected individuals must use digital software and submit quarterly updates to HMRC, as well as an end of year tax return
- Zip Accounting can manage the set up and on-going reporting requirements
Get in touch to discuss how Zip Accounting can help
New rules for landlords and sole traders—HMRC have introduced MTD for Income Tax Self Assessment (MTD for ITSA)
This change affects many sole traders and landlords, and will mean submitting quarterly updates with an end of year tax return through commercial software, rather than one annual tax return.
A new system of penalties for late filing and late payment of tax will also be introduced. However there are no changes to payment due dates presently.
MTD for ITSA will be phased in, starting with individuals whose total combined gross income from sole trade and property exceeds £50,000 per year. Further groups will follow in 2027 and 2028 as the threshold is lowered.
If this applies to you, it’s time to prepare.
What MTD for ITSA Involves
- Keeping digital records using MTD-compliant software
- Sending quarterly income and expense updates to HMRC via the software
- An annual end of year tax return submission will still be required, but in a new format
You must comply with MTD if your combined gross income from sole trade and property meets these thresholds:
- > £50,000 – April 2026
- > £30,000 – April 2027
- > £20,000 – April 2028
The prior year tax return is the measure that determines whether you have exceeded the threshold. For example, the income reported on your 2024/25 tax return will determine whether you are brought into the scheme in April 2026, and so on. If you commenced mid-year, the amount of income used to determine if you are in MTD will be pro-rated.
What If You Can’t Engage Digitally?
You can apply to HMRC for an exemption from Making Tax Digital for Income Tax on the grounds of digital exclusion.
This includes those for whom the use of computers would not be reasonable or practical due to age, disability or location, as well as those who object to using computers on religious grounds.
For details on how to apply for the exemption, please get in touch.
How Zip Accounting Can Help
Zip Accounting can:
- Handle all MTD for ITSA requirements on your behalf
- Review your latest tax return to determine your MTD start date
- Advise whether you need a dedicated business bank account for ease in reporting
- Register you with HMRC for MTD
- Set up compatible software and submit MTD returns on your behalf
Don’t wait until the last minute—get in touch today for a free, no-obligation chat.
Implementation Checklist
- Review your latest tax return and calculate your combined gross income from sole trade and property
- Pro-rate income where you commenced mid-year
- Determine when MTD will apply to you based on the thresholds
- Register with HMRC for MTD for the correct tax year
- Consider which MTD-compliant software you want to use
- Set up the software and begin submitting quarterly updates by the due dates
This is a generic checklist. Contact Zip Accounting for a personalised plan.