Making Tax Digital for Income Tax: Your Questions Answered
Making Tax Digital for Income Tax Self Assessment (MTD ITSA) represents a significant change in how self-employed individuals and landlords report their income to HMRC. Here are the most common questions we receive from our clients.
Frequently Asked Questions
What is MTD ITSA?
MTD ITSA requires you to keep digital records and submit quarterly updates to HMRC using compatible software, replacing the annual Self Assessment tax return with more frequent digital reporting.
When does it start?
April 2026 for those with income above £50,000 and April 2027 for those with income above £30,000. The threshold for those below £30,000 is still to be confirmed.
What are quarterly updates?
Every three months you must submit a summary of your business income and expenses to HMRC through compatible software. An End of Period Statement and final declaration replace the annual return.
What software do I need?
You will need MTD-compatible software that can submit updates to HMRC. Xero is MTD-compatible and is the software we use at Cloud Bookkeeper for all our clients.
Are limited companies affected?
No. MTD ITSA only applies to self-employed individuals and landlords. Limited companies already comply with MTD for Corporation Tax which has a separate timeline.
Will I still need to pay tax annually?
Tax payment dates remain unchanged. You will still make payments on account on 31 January and 31 July as you do now with Self Assessment.
The best way to prepare for MTD ITSA is to start keeping digital records now. Cloud Bookkeeper can set you up with Xero and ensure your business is ready for the transition. Contact us for a free consultation.