Making Tax Digital for Self-Assessment (MTD ITSA)

The way Self-Assessments are submitted is changing from April 2026. Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) will see a shift to digital record keeping for the self-employed and landlords.

What is MTD ITSA?

Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) is the next phase of the digitalization of the UK tax system. The change in the law will see self-employed individuals and landlords keeping records and submitting tax returns digitally.

The new rules will require the use of compliant software to submit a self-assessment, and quarterly submissions known as “Digital Quarterly Updates”.

Why is MTD ITSA Being Introduced?

MTD is being introduced to modernise the UK tax system. It was first announced in the 2015 Budget, with plans to update several aspects of the tax system in phases. This first change was MTD for VAT, which was implemented in 2019.

The change to digital self-assessments is expected to reduce the risk of human error, which accounts for much of the corrections needed for self-assessments each year. The reduction in errors is expected to reduce the self-assessment tax gap. This is an estimate of the tax that has not been collected by HMRC. It was 24.3% in the 2022-23 tax year. This is around £5.9bn that is estimated to have not been paid.

Using software is also expected to save time and be more productive for individuals as the information will be ready by the year end due to the quarterly updates, and records will be kept digitally, removing the need to sort through physical paperwork.

When Will MTD ITSA be Introduced?

MTD ITSA will be introduced in phases depending on an individual’s qualifying earnings. Using the table below, you can see when your self-employment or rental income will be subject to the New MTD ITSA rules:

Yearly Qualifying Income MTD Start Date
Over £50,000 6th April 2026
Between £30,000 and £50,000 6th April 2027
Below £30,000 To Be Announced

The government is currently reviewing whether MTD ITSA should apply to those with a turnover of less than £30,000. If the decision is made to implement MTD ITSA for this group, it should not start until after the other bands have submitted returns, but an exact date is not known.

MTD for partnerships had previously been scheduled for April 2025, however this has been postponed. A new start date has not yet been announced.

Digital Quarterly Updates

One of the largest changes that will be implemented with MTD ITSA is the introduction of Digital Quarterly Updates. Previously, self-assessments have required a single submission by 31st January. But under the new MTD ITSA rules, information must be submitted every quarter, as well as a final submission by 31st January.

Each update will include the income and expenditure for that quarter and must be submitted using MTD-compatible software. These submissions will be cumulative, meaning that you can make amendments to previous submissions within the next quarter, rather than submitting a separate return for corrections. This method is like a VAT return.

It is important to note that this change in submissions is not expected to affect payment methods, such as payments on account, as the final submission deadline will still be 31st January.

MTD-Compatible Software

MTD-ITSA requires the use of compatible software. For software to be classed as MTD compatible, it must meet the following requirements:

  • It must allow digital record keeping. Examples include features for bank connections or transaction imports, and allow invoices, bills, and receipts to be posted. Records must be kept for at least 5 years as per government requirements.
  • It must be able to submit the quarterly updates and final declaration directly to HMRC.
  • It must generate the information for the final declaration and provide a calculation of the tax owed.
  • It must be easy to use.
  • It must update figures such as tax rates and allowances in line with government announcements.
  • It must be secure and offer 2-factor authentication to help keep information safe.

A list of MTD-compatible software is available on the GOV.UK website.

Voluntary Sign-Up to MTD ITSA

If you would like to start submitting your self-assessment in line with MTD ITSA regulations before your earning band’s start date, you can sign up voluntarily if you meet the following criteria:

  • Your details on HMRC are correct
  • You live in the UK
  • You have a National Insurance (NI) number
  • You have submitted a Self-Assessment previously
  • Your accounting period is from 6th April to 5th April
  • You have no outstanding tax

Signing up will mean that you are abiding by MTD ITSA rules during the testing phase. Please note that, during the testing, you cannot claim any losses from previous years or change your accounting period. There is also criteria will prevent you from signing up, such as having a payment plan in place with HMRC.

Is Anyone Exempt from MTD ITSA?

Some individuals may be exempt from MTD ITSA, these include:

  • Those who do not have a National Insurance (NI) number
  • Anyone with a physical or mental condition which would prevent digital access
  • Anyone who has difficulty using digital technology due to their age or a lack of accessibility in their area

 

If you would like further advice on how to prepare for MTD ITSA, or require any further help with your self-assessment, please do not hesitate to contact us.

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Self-Assessment Deadline 2024

The self-assessment deadline for 2023/24 tax returns will soon be upon us. It is important to know when your information needs to be submitted.

When is the Self-Assessment Deadline?

The deadline for the online submission of self-assessments is 31st January following the tax year. For 2023/24 returns, the deadline is 31st January 2025. This is also the payment deadline. You must ensure the tax return is submitted and paid before midnight to avoid penalties.

How Do I Know to Complete a Self-Assessment?

If you have previously completed a self-assessment, HMRC will notify you if a return is needed for that tax year. If you have met the criteria to complete a self-assessment for the first time, you will need to notify HMRC.

How do I Submit a Self-Assessment?

You can submit self-assessments through the HMRC portal. You will need our Unique Taxpayer Reference (UTR), which you will have received after registering for self-assessment.

If you are working with an accountant, they can submit the return on your behalf. We offer self-assessment services to clients across the UK. You can visit our page to learn more.

How Do I Pay my Self-Assessment Tax?

You can pay your self-assessment tax in a variety of ways. HMRC provide a breakdown of the available methods here.

Some additional methods include paying via your tax code if you are on a payroll, or setting up a payment plan with HMRC.

Most individuals will make two payments a year, known as payments on account.

Is there a Fine for Missing the Deadline?

If you miss the deadline HMRC will issue penalties. Penalties are split into two types: late filing & late payment.

These penalties will increase over time.  Submit and pay before the deadline to avoid additional charges.

I Need Help Preparing my Self-Assessment – Who Can I Talk to?

We understand that self-assessments are an additional task on top of your workload, and that it can be difficult to know what you can claim. If you need assistance to complete your self-assessment tax return, please contact us.

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Do I Need to Complete a Self-Assessment?

The deadline to notify HMRC that you must complete a self-assessment tax return is quickly approaching, but it can be tough to know if you need to complete one. HMRC have criteria for who needs to submit a return. This varies depending on the income that you receive.

What is a Self-Assessment?

A self-assessment reports income to HMRC which has not yet been taxed. Unlike employment income, where Income Tax and National Insurance are deducted from a person’s wages, the tax on other types of income is not deducted when it is received. This means that the tax must be collected through a self-assessment.

Self-assessments are currently submitted per tax year. Each tax year covers the period 6th April to 5th April. This means that the current tax year is 6th April 2023 to 5th April 2024. A shift towards quarterly returns will be introduced when Making Tax Digital (MTD) comes into effect.

Who Needs to Complete a Self-Assessment?

HMRC have set criteria which determine who should submit a self-assessment. As there are many ways to earn an income, eligibility is based on the type of income you have received during the tax year. You can find the information which applies to you by clicking the bullet points below:

Sole Traders and Self-Employed Individuals

If you are self-employed or a sole trader, you must submit a self-assessment tax return if you earn over £1,000 in the tax year.

Please note that you must notify HMRC that you have become self-employed within 3 months. Failure to do so will result in a £100 fine.

Income from Property Rental

If you receive income from a renting out a property that you own, you must complete a self-assessment. This will include your rental income and allowable expenses for the tax year.

Allowable expenses are costs relating to the property that you have paid. These include repair costs, water rates, cleaner’s fees, and rental costs if you are sub-letting. Please be aware that any costs paid by the occupants cannot be included on your return

If you are earning between £1,000 and £2,500 a year, contact HMRC. They will advise you whether a tax return is needed.

Dividend Income

If you are a company director or shareholder who receives dividends, you must complete a tax return.

Dividend tax thresholds follow the same bands as Income Tax, with the rate increasing as your taxable income increases. Dividend tax calculations can be affected by the personal and dividend allowances.

Business Partnership Income

If you are part of a business partnership, you must include the share of income you have received on a self-assessment. This is separate from your partnership tax return, but both must be submitted. On your self-assessment this income will be declared on an additional page called SA104.

High Taxable Income

You must complete a tax return if your adjusted taxable income is more than £150,000.

Adjusted net income is your total taxable income before any personal allowances have been applied, less certain tax reliefs (such as Gift-Aid donations and trading losses).

Capital Gains

If you have sold an item at a profit, which can be classed as an asset, you may have to pay capital gains tax. This must be included on your self-assessment.

You will have to pay capital gains tax on personal possessions worth £6,000 or more (excluding cars), business assets, and certain types of shares.

Sale of property will class as a capital gain if is not your main home, if you have let out your main home, or if you have used part of your home exclusively for business. Property gains must be reported to HMRC, and the tax must be paid, within 60 days of the sale. The figures submitted must still be included on your self-assessment, but you will not be taxed further if you have paid the capital gains tax.

High Income Child Benefit Charge

You will need to submit a self-assessment if either you or your partner receive Child Benefit, but one of your adjusted net incomes is more than £50,000. This is because you will receive a tax charge known as the High Income Child Benefit Charge. If you both have incomes greater than £50,000, whoever earns more will pay the charge.

The threshold for this charge will increase from the 2024/25 tax year.

Income Received from Abroad

If you are a UK resident and receive foreign income this must be included on a self-assessment.

If this income has already been taxed in another country, you may be eligible for Foreign Tax Credit. This is dependent on the double-taxation agreement that the UK has with the other country.

UK-Based Income for Non-UK Residents

If you are not a UK resident, you will still need to submit a self-assessment if:

  • you receive rent from a UK property
  • you sell goods or services/run a business in the UK
  • you have a pension outside the UK but you were UK resident in one of the 5 previous tax years
  • you have other untaxed UK income

Your tax will be calculated automatically on the days you work in the UK if you are employed in this country but live elsewhere.

I Am Eligible for Self-Assessment – How Do I Notify HMRC?

If you meet the criteria to submit a self-assessment, but have not received a notification, you must notify HMRC before 5th October by registering for self-assessment online.

If you have received a notification letter, or a self-assessment form, from HMRC you must complete and submit a tax return. You will receive this if HMRC are aware that you need to submit a return.

I Want Help to Complete My Self-Assessment – Who Can I Ask?

Accountants can register you for self-assessment and submit tax returns on your behalf. Once you have engaged with an accountant, they can request the relevant information from you and prepare your self-assessment for submission. If you are interested in our services, please do not hesitate to contact us.

If you need further information on how to pay your self-assessment tax please use our blog resources.

 

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