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MTD ITSA FAQ: Everything You Need to Know

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24th January 2025

1. What is MTD ITSA?

MTD ITSA (Making Tax Digital for Income Tax Self-Assessment) is part of HMRC’s initiative to modernise the tax system. It requires self-employed individuals and landlords to keep digital records of their income and expenses and submit quarterly updates to HMRC using MTD-compatible software.

2. Who does MTD ITSA apply to?

MTD ITSA applies to:

  • Self-employed individuals and landlords with annual business or property income exceeding £50,000 from April 2026.
  • Those earning between £30,000 and £50,000 will need to comply from April 2027.

Future plans for individuals earning below £30,000 are still under consultation.

 

3. When does MTD ITSA start?

  • April 2026: For individuals earning over £50,000 annually.
  • April 2027: For individuals earning between £30,000 and £50,000 annually.
 

4. What records do I need to keep digitally?

You’ll need to maintain digital records of:

  • Income
  • Expenses
  • Bank transactions related to your business or property

These records must be stored in MTD-compatible software and submitted to HMRC via quarterly updates.

 

5. How often do I need to report under MTD ITSA?

You’ll need to submit:

  • Four quarterly updates summarizing your income and expenses throughout the year.
  • An End of Period Statement (EOPS) at the end of the tax year to confirm your figures.
  • A Final Declaration to declare all your income and confirm your tax liability.
 

6. What software do I need for MTD ITSA?

You’ll need MTD-compatible software to manage your records and submit updates. Popular options include:

  • QuickBooks
  • Xero
  • FreeAgent

We can help you choose the best software for your needs and set it up for you.

 

7. What happens if I don’t comply with MTD ITSA?

Failure to comply with MTD ITSA requirements may result in penalties from HMRC. These could include fines for late submissions or non-compliance with digital record-keeping rules.

 

8. Do I still need to file a Self-Assessment tax return?

No, MTD ITSA replaces the traditional annual Self-Assessment tax return. Instead, you’ll submit quarterly updates, an EOPS, and a Final Declaration through your MTD-compatible software.

9. How can Guida Accountancy help me with MTD ITSA?

We provide:

  • Expert advice tailored to your situation.
  • Setup and training for MTD-compatible software.
  • Assistance with quarterly updates and year-end submissions.
  • Ongoing support to ensure compliance and peace of mind.

10. What should I do now to prepare for MTD ITSA?

  • Determine when MTD ITSA will apply to you based on your income.
  • Choose and set up MTD-compatible software.
  • Organize your records to ensure accuracy.
  • Seek professional advice to streamline the transition.

Still Have Questions? We’re Here to Help!

Contact us below and we’ll support you along your MTD ITSA journey. 

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