Making Tax Digital for Income Tax: What You Need to Know

Making Tax Digital for Income Tax Self-Assessment (MTD IT/SA) is a significant shift in how self-employed individuals and landlords in the UK manage and report their taxes. It’s part of the government’s broader initiative to modernise the tax system, making it more efficient and reducing errors.

If you’re self-employed or a landlord, this change will likely impact how you track your income and submit tax returns. Let’s break down what MTD IT/SA is, how it will affect you, and what steps you need to take to stay compliant.

What Is MTD IT/SA?

MTD IT/SA stands for Making Tax Digital for Income Tax (Self-Assessment). It’s an extension of the existing Making Tax Digital (MTD) rules, which already apply to VAT. The goal is to simplify tax reporting and improve accuracy for:

• Self-employed individuals
• Landlords with annual rental income

Under MTD IT/SA, you’ll be required to:

1. Keep digital records of your income and expenses.
2. Submit quarterly updates to HMRC using MTD-compatible software.
3. File an End of Period Statement (EOPS) and a Final Declaration to confirm your annual income and tax liability.

Who Does MTD IT/SA Apply To?

MTD IT/SA will be rolled out in phases:

• April 2026: Applies to self-employed individuals and landlords with an annual business or property income exceeding £50,000.
• April 2027: Expands to those earning between £30,000 and £50,000.
• Future Plans: HMRC is still consulting on how the rules will apply to individuals earning below £30,000, so it’s essential to stay updated.

How Will MTD IT/SA Affect You?

1. Digital Record-Keeping
   If you currently use paper records or spreadsheets, you’ll need to switch to MTD-compatible software to maintain digital records.
2. Quarterly Reporting
   Instead of filing an annual Self-Assessment tax return, you’ll submit four quarterly updates to HMRC, providing a snapshot of your income and expenses.
3. End-of-Year Submissions
   You’ll still need to finalise your accounts at the end of the year, but the process will be streamlined through digital tools.
4. Increased Transparency
   With regular updates, you’ll have a clearer picture of your tax obligations throughout the year, reducing any unexpected surprises.

How to Prepare for MTD IT/SA

1. Determine If MTD IT/SA Applies to You
   Check your annual income from self-employment or property to see when you’ll need to comply.
2. Choose MTD-Compatible Software
   Software like Xero, and FreeAgent are MTD-compatible and will help you manage records and submit updates seamlessly.
3. Organize Your Records
   Ensure your income and expenses are accurately recorded. If you’re used to paper receipts, now is the time to transition to a digital system. We recommend Apron or Dext for this—reach out if you need guidance on which is best for you.
4. Learn the New Process
   Familiarise yourself with submitting quarterly updates, End of Period Statements (EOPS), and Final Declarations.
5. Seek Professional Advice
   MTD IT/SA can be complex, especially if you’re new to digital accounting. A trusted accountant can guide you through the transition and ensure compliance.

How Artisan Accountant & Co Can Help

At Artisan Accountant & Co, we understand the challenges that MTD IT/SA presents for self-employed individuals and landlords. Our goal is to make the transition as smooth and stress-free as possible.

Here’s how we can support you:

1. Expert Guidance
   We’ll help you understand how MTD IT/SA affects your specific situation and create a plan to ensure compliance.
2. Software Setup and Training
   Choosing and setting up MTD-compatible software can be overwhelming. We’ll recommend the best option for your needs, handle the setup, and provide training.
3. Quarterly Reporting Support
   We’ll assist with preparing and submitting your quarterly updates to HMRC, ensuring accuracy and timeliness.
4. Year-End Submissions
   From the End of Period Statement to the Final Declaration, we’ll manage your year-end submissions so you can focus on running your business.
5. Ongoing Support
   We’re here to answer your questions, troubleshoot issues, and provide peace of mind as you navigate MTD IT/SA.

Get Ready for MTD IT/SA with Artisan Accountant & Co

Making Tax Digital for Income Tax Self-Assessment is a major change, but you don’t have to navigate it alone. At Artisan Accountant & Co, we’re experts in helping self-employed individuals and landlords transition to MTD seamlessly.

📞 Contact us today to discuss how we can help you stay compliant and make the switch to digital accounting with confidence!