Making Tax Digital for ITSA: What You Need to Know and How Glass Accountants Can Help

As part of the UK government's ongoing efforts to modernise the tax system, the introduction of Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) will have a significant impact on sole traders, landlords, and small businesses. But there’s good news: the government has listened to concerns and extended the timeline, giving you more time to prepare.

What’s New with MTD for ITSA?

Originally set to come into effect in April 2024, the mandatory transition to MTD for ITSA has now been delayed until April 2026. The government understands that many self-employed individuals and landlords are facing challenging economic conditions, and that adjusting to new tax reporting methods could be daunting. This extension gives you a longer window to get your records in order and get comfortable with the new digital reporting requirements.

Key Changes and Timelines

Here’s a breakdown of the new MTD for ITSA timeline and thresholds:

• From April 2026: If your income exceeds £50,000, you will be required to keep digital records and send quarterly updates of your income and expenses to HMRC using MTD-compatible software.

  
  

• From April 2027: The threshold drops to £30,000, meaning sole traders and landlords with income between £30,000 and £50,000 will need to comply with MTD from this point.

  
  

Voluntary Participation: You don't have to wait until the deadlines—if you wish, you can voluntarily sign up before these dates, allowing you to benefit from the digital tax system early and reduce common errors.

What This Means for You

This change might feel overwhelming, but with the right approach, it could simplify your tax reporting and save you time in the long run. By recording your income and expenses digitally, you’ll be able to keep track of your finances in real-time, making your tax return easier and less stressful.

For those already maintaining records digitally, MTD for ITSA won’t feel like a huge change. For others, it’s a good opportunity to streamline your accounting practices, ensuring your tax returns are accurate and up-to-date.

A Special Review for Smaller Businesses

The government has acknowledged that smaller businesses—those with income below £30,000—might face unique challenges. That’s why a review will be conducted to determine how MTD for ITSA can be adapted to better meet their needs, ensuring that the system works for all businesses, regardless of size.

What About Partnerships?

Initially, it was planned that general partnerships would be required to comply with MTD for ITSA from 2025, but this has now been postponed. The government is reviewing the best way to implement MTD for ITSA for partnerships, and no new dates have been set yet.

How Can Glass Accountants Help?

At Glass Accountants, we understand that navigating new tax regulations can be challenging. Our team of experts is here to help you adapt to MTD for ITSA, ensuring that you comply with the new requirements while maximising the benefits of this digital system.

We’ll assist you in:

• Setting up MTD-compatible software

• Organising your digital records

• Filing quarterly updates to HMRC

• Providing support throughout the transition to ensure everything runs smoothly

  
  

Additionally, we can help you stay on top of deadlines and deadlines to avoid any potential penalties.

Moving to a Digital Future

The ultimate goal of MTD for ITSA is to make tax administration easier and more efficient for all self-employed individuals and landlords. By gradually moving to a digital system, HMRC believes that taxpayers will benefit from more accurate reporting, reduced errors, and a more efficient tax system overall. As a result, you’ll be able to budget better, plan ahead, and have a clearer picture of your finances.

At Glass Accountants, we’re committed to supporting you throughout this transition and beyond. We’ll help you understand how MTD for ITSA affects your business and ensure you’re ready to comply when the time comes. Don’t hesitate to reach out to us for advice, guidance, or assistance in getting your records and reporting systems set up for the future.