Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) and Landlords: What You Need to Know
Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) is set to transform the way sole traders and landlords in the UK manage their taxes. It focuses on digital record-keeping, streamlining tax reporting, and encouraging the use of digital tax software, ultimately modernising the UK tax system.
If you’re feeling a bit overwhelmed by the changes, you’re certainly not alone. Many of our clients have expressed concerns about the new rules, which is why we’ve put together this guide to help you get to grips with MTD for ITSA. Here’s everything you need to know to stay ahead of the game.
What is MTD for ITSA?
MTD for ITSA is a new digital system for sole traders and landlords to report their income and expenses. You’ll need to:
Keep digital records of your income and expenses.
Send four quarterly updates each year.
Submit a final declaration at the end of the tax year.
The goal is to make it easier to manage and pay the right amount of income tax.
When does MTD for ITSA start?
For sole traders and landlords, MTD for ITSA comes into effect in April 2026 for individuals with turnover from self-employment income and/or gross rent from rental property of £50,000 (combined). In April 2027, this threshold will reduce to £30,000, bringing in more taxpayers.
The shift towards digital tax reporting has been underway for a while. Back in 2019, the government introduced Making Tax Digital for VAT, requiring VAT-registered businesses to submit their returns electronically. MTD for ITSA is the next step in this digital transformation.
Whilst this may seem far off, it’s a good idea to get ahead of the changes proposed in this tax year. In most cases, we recommend making the move to digital record keeping on cloud-based software such as QuickBooks or Xero.
Do Partnerships need to follow MTD for ITSA?
HMRC has yet to confirm when Partnerships will need to start following MTD rules, but it will happen. Preparing for MTD early is key, and we recommend setting up with digital record keeping in advance.
What about MTD for Corporation Tax?
As of March 2025, HMRC has not yet confirmed a mandatory implementation date for MTD for Corporation Tax. HMRC will provide ample notice before mandating MTD for Corporation Tax, allowing businesses sufficient time to prepare.
So, What Does This Mean in Practice? Let’s Take a Closer Look.
Digital Record-Keeping
One of the key requirements of MTD for ITSA is maintaining digital records. This includes:
Recording Income: Every invoice should be digitally stored and linked to the corresponding bank transaction.
Tracking Expenses: Every expense should be digitally recorded with proof of purchase, such as receipts or invoices.
If you already have a business bank account, it’s worth ensuring it integrates with MTD-compatible software such as QuickBooks or Xero for seamless record-keeping.
Submitting Quarterly Reports
MTD for ITSA requires quarterly updates to be submitted using MTD-compatible software. The deadlines for these updates are:
Quarter: Deadline date:
Quarter ended 30th June 7th August
Quarter ended 30th September 7th November
Quarter ended 31st December 7th February
Quarter ended 31st March 7th May
If this sounds like a lot to keep track of, don’t worry— Ellis Atkins can manage it all for you.
Final Declaration
At the end of each tax year, you’ll need to submit a final declaration. This will provide a complete overview of your income and expenses, using the quarterly updates to ensure everything adds up. It also gives you the chance to make any necessary edits and confirm your tax information is accurate.
The deadline for the final declaration will be 31st January, the same as the current Self-Assessment deadline. Obviously, we don’t recommend leaving this to the last minute!
What happens if you don’t comply?
MTD for ITSA is a legal requirement for qualifying sole traders and landlords. Not keeping digital records or failing to submit updates on time could result in fines and penalties.
Moreover, if HMRC audits your records and finds discrepancies, you could face further fines and legal action.
How to comply with MTD for ITSA
We understand - running a business or managing rental properties can already be a full-time job. Adding digital tax reporting to your to-do list might feel overwhelming. But you don’t have to tackle MTD for ITSA alone. Ellis Atkins is here to help. Our team of professional bookkeepers can:
· Provide bookkeeping training that enables you to keep your own records on cloud-based MTD-compliant bookkeeping software.
· Alternatively, we can provide you with a fully outsourced bookkeeping service, including regular management accounts.
· Or we can offer something in-between where you keep your own books, and we review them on a quarterly basis and prepare your quarterly returns for you.
With us on your side, you can focus on growing your business, knowing your taxes are in safe hands.
Want to learn more about our bookkeeping services? Get in touch with us today. We’re here to help you navigate the transition to Making Tax Digital with ease and confidence!
01306 886681 - please ask for Lisa
info@ellisatkins.co.uk