MTD ITSA

At Current Accountancy, we’re here to help you understand Making Tax Digital (MTD) and how it affects you.

MTD is a government initiative that aims to simplify tax management for individuals and businesses by encouraging the use of digital tools to keep financial records, file taxes, and make payments online.

This means using software to track income and expenses instead of handling everything manually. If you’re a small business owner or self-employed, you’ll need to keep your records in a digital format that meets HMRC standards.

This change is a great opportunity to embrace technology, improve how you manage your finances, and gain real-time insights into your business’s performance.

When Does MTD ITSA Come In?

MTD ITSA will start in April 2026 for self-employed individuals and landlords earning over £50,000. Then, in April 2027, the guidelines will be expanded to include individuals earning over £30,000. More information about when partnerships and businesses below these thresholds will move to MTD will be released in the coming months/years.

Who Will Be Affected?

  • Self-Employed Individuals: Anyone working as a sole trader who earns above the threshold will need to comply with MTD ITSA.
  • Landlords: Those renting out property and earning above the set threshold will also be affected.

What Does This Mean?

  1. Digital Record Keeping: You’ll need to keep your financial records digitally using compatible software, making it easier to track income, expenses, and taxes.
  2. Quarterly Updates: Instead of submitting a tax return just once a year, you’ll report your financial updates quarterly, helping you stay on top of your tax obligations.
  3. Direct Submission to HMRC: You will file your tax information directly from your accounting software to HMRC, making the process more straightforward and reducing errors.
  4. Software Compatibility: The accounting software you choose must work with HMRC’s systems to ensure secure and efficient submission of your information.
  5. Easier Tax Management: MTD aims to simplify the tax process, making it easier for you to manage taxes, plan payments, and avoid missing deadlines.
  6. Phased Rollout: MTD is being introduced in stages, starting with sole traders earning above £50,000 per year
  7. End of Year Submission: As well as quarterly updates, you will need to confirm that your previous filings are accurate and submit a self-assessment return at the end of the year.

What You Need to Do

To prepare for MTD, here are some steps to take:

  1. Choose MTD-Compatible Software: Select accounting software that meets MTD requirements and can connect directly to HMRC.
  2. Keep Digital Records: Maintain all financial records, including income and expenses, in your chosen software. This keeps your data organized and accessible.
  3. Submit Information Regularly: Report your income and expenses to HMRC every quarter directly from your software.
  4. Train Your Staff: If you have employees, make sure they understand the new processes and how to use the accounting software.
  5. Stay Up to Date: Keep informed about any changes related to MTD, such as new software requirements or deadlines.
  6. Review Your Processes: Check your current accounting practices to ensure they align with MTD requirements, which may involve updating how you record transactions.
  7. Seek Professional Advice: If you’re unsure about anything, consider reaching out to your accountant for guidance.

By following these steps, you can smoothly transition to MTD requirements, making tax management easier and more organized for your business.

At Current Accountancy, we’re here to support you through the MTD transition and help you choose the right tools for a seamless experience. Let us assist you in staying compliant and thriving in this new digital tax environment!