The Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) initiative is expanding, and its phased introduction will soon impact sole traders and unincorporated landlords. If you fall into this category, it’s time to start planning ahead.
Here’s everything you need to know about the changes, who they affect, and how to prepare.
What is MTD for ITSA?
Under MTD for ITSA, sole traders and unincorporated landlords must:
- Keep digital records of their business and/or property income.
- Submit quarterly updates to HMRC using MTD-compatible software.
The rollout is being introduced in three phases, with thresholds gradually lowering to include more taxpayers.
Phase 1 – April 2026 Start Date
From 6 April 2026, MTD for ITSA will apply to:
- Sole traders and unincorporated landlords with a combined annual taxable income from business and property exceeding £50,000.
Key point: The £50,000 threshold considers the total of both business and property income. For example:
- A sole trader earning £40,000 from their business and £12,000 from property will need to comply, even though neither income stream exceeds £50,000 individually.
Phase 2 – April 2027 Start Date
From 6 April 2027, the threshold will be reduced to £30,000.
At this stage, MTD for ITSA will apply to:
- Sole traders and unincorporated landlords with annual taxable income from business and/or property exceeding £30,000.
Phase 3 – Date to Be Confirmed
By the end of the current Parliament, the threshold will drop further to £20,000.
Although no exact date has been announced, this change will be confirmed at a future fiscal event. This means sole traders and unincorporated landlords earning over £20,000 will eventually need to comply with MTD for ITSA requirements.
How to Prepare
To ensure a smooth transition, it’s important to start preparing now:
- Know Your Start Date
- Determine which phase applies to you based on your total taxable income.
- Get MTD-Compatible Software
- You’ll need software that meets HMRC’s requirements for submitting digital records and quarterly updates. Check the list of approved options on the Gov.uk website.
- Start Transitioning Early
- Consider adopting MTD practices now, even if your start date is a few years away. This will give you time to adjust and avoid last-minute stress.
- Seek Professional Support
- A trusted accountant can help you navigate the changes and ensure compliance.
How Can Jon Davies Accountants Help?
Navigating the transition to MTD for ITSA doesn’t have to be overwhelming. At Jon Davies Accountants, we can help you:
- Determine your MTD start date.
- Choose the right software for your needs.
- Ensure your records and reporting processes are fully compliant.
💡 Contact Jon and the team today to get ahead of the changes and make MTD work for you!
Are you ready for MTD? Let us know your questions—we’re here to help.
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Any questions?
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