If you are self-employed or in receipt of property income, you are likely one of the ‘mandated income types’ impacted by the Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) changes.
There are certain exemptions, but this is an expanding scheme with a phased mandation meaning that more people will be required to join MTD every year.
1. From April 2026, those with a gross income over £50,000 will be required to comply
2. From April 2027, self-employed individuals and landlords earning over £30,000 (gross)
3. In April 2028, these groups will be joined by those earning above £20,000 (gross)
These income figures are based on the previous year’s tax return, so if your 2024/25 return shows a gross income of over £50,000, your digital start date will be April 2026. There are certain exemptions, including trusts, charities, ministers of religion and recipients of Blind Persons’ Allowance, but some exemptions will only apply if HMRC has been notified and satisfied (for example, those subject to Power of Attorney).
The world is becoming increasingly digitally orientated, and income tax is no different to this! Many, if not all, of your invoices, receipts and records are sent and stored digitally so it makes sense for your financial record keeping and tax submissions to be digital too. For MTD ITSA, initially, you will need to be signed up correctly with HMRC – we can act on your behalf to get this done!
You will be expected to keep digital records. These need to cover all transactions and include:
• The date
• The amount
• The nature of the income/expense
You can use different types of software (for example, it’s fine to keep income records in one app and expenditure in another) and it is best practice to create the records as near to real time as possible.
You will also need to make quarterly submissions to HMRC, providing the cumulative totals of the transactions for the quarter. Penalty points can be given if these obligations are not met!
Finally, the annual tax return will be due on 31st January to finalise the tax year. There no changes to payment dates and while the ‘tax return’ must be submitted by third party software, the computation of tax is by HMRC.
Do check if you will be impacted by MTD ITSA so that you can be prepared for the digital record keeping. If you are unsure, why not contact us today by calling on 01244 722504 or sending an email to info@palmaccountancy.co.uk, and we can advise you.
You will need to keep digital records and be prepared to send those quarterly updates to HMRC in a timely manner. At Palm Accountancy, we are ready to help you meet your tax obligations and adjust to these MTD changes with minimal fuss, so do contact us for advice and support.
You can also find further detailed information via the HMRC website using the following link:- https://www.gov.uk/government/collections/making-tax-digital-for-income-tax
