MTD ITSA - another step closer

Timetable

In April 2026, just 15 months away, sole traders and landlords whose turnover exceeds £50,000 per year (based on figures for 2024/25) will need to use Making Tax Digital for Income Tax Self-Assessment (MTD ITSA). In April 2027 MTD ITSA will be mandatory for sole traders and landlords with turnover exceeding £30,000 for 2025/26. For those with lower turnovers MTD ITSA won’t be mandatory but can be used voluntarily.

HMRC encouragement

After a few false starts HMRC launched the MTD ITSA pilot in April 2024. However, reports of the many problems with its predecessor have deterred many from signing up for this version. In a move to bring more sole traders and landlords on board, at the end of 2024 HMRC published new guidance on how to bring records up to date so that you can join MTD ITSA part way through the current or 2025/26 tax year. It has also published a “toolkit” to help you and your accountant get to grips with the fundamentals. Most bookkeeping software is now or soon will be compatible with MTD ITSA, and HMRC’s latest guidance contains links to these. If you use spreadsheets instead of bookkeeping software it’s still possible for you to use the MTD ITSA pilot through so-called bridging software. Details of these options are also in HMRC’s guidance.

No penalties

During the voluntary period HMRC will not penalise you with fines for late reporting or mistakes you make if they relate to using MTD ITSA. Naturally, the usual penalties continue to apply for failing to declare income etc. Joining the pilot will put you ahead of the game and allow you to iron out bookkeeping and reporting issues before it becomes mandatory