Digital tax is here and will soon start impacting more businesses – Preparing for MTD for ITSA

By April 2026, Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) will become a requirement for thousands of businesses and self-employed individuals.  

This next phase of MTD is part of the Government’s push towards modernising tax reporting and improving efficiency. 

Whether you are a landlord, a sole trader, or a business owner, it is time to get ready for the changes ahead. 

The evolution of MTD 

Making Tax Digital began with VAT, revolutionising how businesses handle tax submissions: 

• 2019 – The first wave required VAT-registered businesses above the VAT threshold to submit their returns digitally. 

• 2022 – The scope expanded to include all VAT-registered businesses, regardless of turnover. 

Now, attention has turned to Income Tax, with MTD for ITSA set to reshape how Self-Assessment taxpayers interact with HM Revenue & Customs (HMRC). 

What to expect from ITSA in 2026 and beyond 

The rollout of MTD for ITSA will happen in phases: 

• April 2026 – Individuals earning over £50,000 annually from self-employment or property income must comply. 

• April 2027 – The threshold drops to include those earning more than £30,000 annually. 

Future phases will extend these requirements to taxpayers earning above £20,000, but exact dates have yet to be announced. 

Why MTD is non-negotiable 

The October 2024 Budget reaffirmed the Government’s commitment to digital tax systems.  

MTD is designed to reduce errors, streamline tax processes, and ensure a more accurate flow of information between taxpayers and HMRC. 

For businesses and individuals, adapting to these changes is clearly required to meet legal obligations, but is also an opportunity to improve financial management and efficiency. 

How to stay ahead of the curve 

Transitioning to MTD can feel daunting, but preparation will make all the difference.  

Here are actionable steps to get ready: 

1. Audit your current system 

• Are your records digital or still paper-based? Identify gaps in your current processes to understand what needs to change. 

1. Select reliable software 

• HMRC-approved software is at the heart of MTD compliance. Choose a solution that integrates with your existing systems and offers features like real-time updates. 

1. Invest in skills development 

• If you manage finances in-house, ensure your team understands how to operate the new software. Training sessions now can prevent headaches later. 

1. Set up a compliance timeline 

• Don’t wait for the deadlines to creep up. Create a timeline to implement changes gradually, ensuring you’re fully prepared when MTD for ITSA goes live. 

Common missteps to avoid 

While the move to MTD brings opportunities, it also presents challenges. Avoid these common problems: 

• Delaying action – Waiting until 2026 could leave you scrambling to comply, leading to costly errors. 

• Choosing inadequate software – Not all tools are created equal. Verify that your software is fully compatible with HMRC requirements. 

• Underestimating training needs – A lack of knowledge about digital systems could lead to inefficiencies or missed deadlines. 

The benefits of MTD 

While MTD might feel like a burden at first, it offers long-term advantages: 

• Improved accuracy – Digital records reduce the risk of human error, ensuring your tax returns are correct. 

• Streamlined reporting – With real-time data, you’ll have a clearer picture of your finances, enabling better decision-making. 

• Enhanced organisation – Digital systems make it easier to access and manage historical records when needed. 

Whether you need help choosing software, understanding compliance rules, or training your team, our expert accountants are here to guide you. 

Contact us today and ensure your business is ready for MTD for ITSA.