Making Tax Digital (MTD) is an initiative by HMRC aimed at modernising the UK tax system.
Under the proposed initiative self-employed individuals and landlords are obligated to:
- Maintain digital records of their financial transactions.
- Utilise software Making Tax Digital (MTD) is an initiative by HMRC aimed at modernising the UK tax system. that is compatible with the MTD framework.
- Submit tax updates every quarter, thereby moving the tax system towards real-time reporting
As it currently stands
- Sole traders and landlords earning above £50,000 will be required to adhere to the ITSA (Income Tax Self Assessment) regulations starting in April 2026.
- Sole traders and landlords earning above £30,000 will follow in April 2027.
- Those below £30,000 are yet to be mandated.
Practical steps sole traders and landlords can take to prepare now for the upcoming ITSA requirements:
Organise Financial Records
Start by meticulously recording all financial transactions related to your business or rental property. Use digital tools or accounting software to maintain accurate records.
Choose Compatible Software
Ensure that you are using HMRC-approved software that is compatible with MTD and ITSA. This software will help you keep digital records, calculate taxes, and submit updates seamlessly.
Understand Your Obligations
Familiarise yourself with the specific ITSA rules that apply to your situation. Understand the deadlines for quarterly submissions and annual tax returns.
Quarterly Reporting
Prepare to submit quarterly updates on your income, expenses, and other relevant financial data.
Stay Informed
HMRC regulations may evolve, and it’s essential to stay informed about any changes.
Test Your Software
Verify that your chosen software can handle the required tasks effectively. Test its functionality for record-keeping, calculations, and submission.
Early preparation and understanding of the process will make the transition to ITSA smoother.
Once taxpayers are required to join MTD (Making Tax Digital), they will become subject to the new penalty system associated with it.
We can:
- Help you choose and move onto cloud-based software
- Guide you through the process, answer your questions, and ensure compliance.
- Keep you informed and updated on any HMRC regulation changes.
- Prepare and submit quarterly reports.
- For a smooth transition, give us a call on 01844 261155, or email Chloe Jackson
Janet Rochford
Marketing Manager
