HMRC will shortly be writing to taxpayers it thinks will be affected by the new Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) so in this blog post we cover what it is, who will be affected, and when.
What is Making Tax Digitial for Income Tax?
HMRC first introduced Making Tax Digital for VAT which was a move to digitalise the process of submitting returns by requiring VAT registered businesses to use a software package to do so. Making Tax Digital for Income Tax is s similar move, with the intention being for taxpayers to submit more information, more regularly.
Who is affected?
Taxpayers that have more than £50,000 of income from self-employment or property, or both, in the 2024/25 tax year will need to apply MTD ITSA from 6 April 2026. Those taxpayers that have more than £30,000 of income from self-employment, or property, or both, in the 2025/26 tax year will need to apply MTD ITSA from 6 April 2027.
Who does not need to adopt MTD ITSA…….yet
- Those with self-employment and property income below £30,000
- Those operating in a Partnership, including Limited Liability Partnerships (LLPs), unless for example they were also a landlord with property income over £30,000
- Those with income greater than £30,000 but from sources other than self-employment or property, for example dividend income. However, someone caught under MTD ITSA by the current measures will need to report all of their income under it.
What filings will be made under MTD ITSA?
Taxpayers or their tax advisors will need to submit a summary of their income and expenses to HMRC every quarter. Accounting and tax adjustments are optional on these quarterly reports. By default the quarters will follow the tax year and must be filed by the 7th of the month following the quarter end, so will look like this:
| Quarter ended | Filing deadline |
| 5 July | 7 August |
| 5 October | 7 November |
| 5 January | 7 February |
| 5 April | 7 May |
Taxpayers will have the option to better align with accounting dates and so for example file quarters to 30 June, 30 September, 31 December, and 31 March. The filing deadlines will remain as per the default scheme.
After the final quarter has been submitted there will be a year-end declaration via a digital tax return. This will be similar to the current self-assessment returns but will pre-populate with the information from the quarterly submissions already made, and then accounting and tax adjustments can be made accordingly (for example for disallowable expenditure). At this point someone reporting under MTD ITSA because of their self-employment and/or property income will also need to report their other sources of income such as interest received, dividends, salary etc, even though these presently don’t trigger MTD ITSA. This is because those under MTD ITSA will stop submitting self-assessment tax returns that would otherwise capture this information. The filing deadline for the year-end return is 31 January following the final quarter – so same deadline as under self-assessment.
How are the submissions to HMRC made under Making Tax Digital for Income Tax?
Digital record keeping is required, either in purpose-built software or on spreadsheets. The submissions will then be made either directly from the software or via a new HMRC online service.
Conclusion
Whilst Making Tax Digital for Income Tax represents a big change to those used to filing once a year under self-assessment, HMRC have worked to reduce the burden as much as possible and it now represents something much more workable. It’s important to note that HMRC will not register taxpayers under MTD ITSA, the onus is on the taxpayer or their tax advisor to do so.
Veritons are an experienced accountancy and tax advisory firm operating from our base in Medway, Kent, but with clients all over the country. If you have any questions over MTD ITSA and how you may be affected, feel free to reach out to us via the contact button below.