The UK government has just released important guidance for sole traders, landlords, and agents interested in testing the new Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) system. The system is designed to simplify the process of reporting income and expenses by moving everything online. For businesses and individuals navigating complex tax reporting requirements, MTD for ITSA offers a streamlined and efficient approach to maintaining accurate records and submitting them to HMRC.
The guidance provides clear instructions on setting up digital records and connecting to HMRC’s systems. For sole traders and landlords with an income above the £10,000 threshold, this guidance marks an essential step in getting familiar with the new digital tax reporting requirements before they become mandatory. Participants in the testing phase gain early access to the MTD for ITSA platform, allowing them to explore the system, identify potential challenges, and provide feedback that could shape the final rollout.
In the guidance, HMRC stated that MTD for ITSA will be introduced in two phases:
- From April 2026 for those with qualifying income over £50,000
- From April 2027 for those with qualifying income over £30,000
MTD for ITSA introduces several benefits, including reduced administrative tasks, real-time tracking of tax liabilities, and an overall more transparent view of an individual’s financial status. Using compatible software, sole traders and landlords can update HMRC quarterly, which helps avoid surprises at the end of the tax year.
If you’re interested in trying this new system, we can offer you further guidance and support. By assisting with the setup of MTD for ITSA, digital record-keeping, and software selection, we can ensure that you maximise its benefits and remain compliant. Embracing MTD for ITSA early could significantly ease the eventual transition, allowing you to manage your tax affairs more efficiently and avoid last-minute adjustments.