Introduction to Making Tax Digital for Income Tax Self Assessment (MTD for ITSA)
Under MTD for ITSA, sole traders and unincorporated landlords must keep digital records of their trading and/or property income and provide quarterly updates to HMRC using MTD-compatible software. The implementation is being phased in over several years.
Phase 1 – Starting April 2026
From 6 April 2026, MTD for ITSA will apply to those whose combined taxable business and property income exceeds £50,000 annually. It’s crucial to understand that this threshold is based on the total income from both sources. For instance, a sole trader with a business income of £40,000 and property income of £12,000 must comply with MTD for ITSA from 6 April 2026, even though neither income source exceeds £50,000 individually.
Phase 2 – Starting April 2027
Starting 6 April 2027, the threshold for MTD for ITSA will be lowered to £30,000. From this date, sole traders and unincorporated landlords with a combined business and/or property income exceeding £30,000 must adhere to MTD for ITSA requirements.
Future Expansion – By the End of the Current Parliament
During the 2024 Autumn Budget, the Government announced that by the end of the current Parliament, MTD for ITSA will extend to those with business and/or property income exceeding £20,000. The exact date for this implementation will be announced at a future fiscal event.
Planning Ahead
Sole traders and unincorporated landlords must know their MTD start dates and ensure they are prepared to comply. This involves using MTD-compatible software, which can be found on the Gov.uk website.
Reference
Partner note: Autumn Budget 2024 – Overview of Tax Rates and Legislation, para. 2.41.
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