Making Tax Digital (MTD) is an initiative that HMRC announced back in 2015 to modernise the UK tax system and make it easier for individuals and businesses to manage their tax affairs online.
And yet, MTD has been delayed several times, and now the demands of MTD for income tax self-assessment have changed. So what’s the latest update on MTD? Langdowns DFK break it down for you.
MTD in 2024
Right now in 2024, MTD only applies to VAT-registered businesses. Registering for VAT, the UK’s sales tax, is voluntary unless you have a
turnover of £85,000 or above – then it is compulsory.
MTD for VAT was first introduced in 2019 for certain businesses. In 2022, it became compulsory for all VAT-registered businesses to follow MTD for VAT rules.
Put simply, MTD for VAT requires businesses to use MTD-compatible software to submit VAT returns digitally. It also requires businesses to keep and maintain digital records of your business transactions using MTD-compatible software.
What’s next?
In April 2026, MTD for ITSA will be introduced. MTD corporation tax will follow after, but HMRC hasn’t given us a date – as soon as they do, we’ll let you know.
Now, you may think you know everything about MTD for ITSA, but did you know that it’s been delayed and will be rolled out with a phased approach (it will first apply to different businesses at different times)? And did you know that in the Autumn Statement in 2023, the Government changed the requirements of the scheme? Allow us to explain.
First, HMRC will now introduce MTD for ITSA with a phased approach. This means that:
● from April 2026, sole traders and landlords earning above £50,000 annually will need to follow MTD for ITSA rules.
● from April 2027, sole traders and landlords earning above £30,000 annually will follow MTD for ITSA.
As for general partnerships and small businesses earning less than £30,000, the Government has said they would not extend MTD for ITSA to them – but that could change.
MTD for ITSA requirements
This time last year, the Government was telling us that businesses under MTD for ITSA would have to maintain digital records and submit them to HMRC every quarter, and an end-of-period statement (EOPS) would have to be complete – replacing yearly self-assessment tax returns. In late 2023, though, the Government changed some parts of the process to better suit businesses and fill in some gaps:
● Quarterly updates can now be edited and corrected if there are errors, so you don’t need to resubmit for previous faulty quarters.
● You won’t need to do an EOPS. However, you will have to still complete the final declaration, which has been edited to incorporate elements of the EOPS.
● Foster carers and self-employed individuals without a National Insurance Number are now exempt from MTD for ITSA.
● Landlords who jointly let a property will be able to report only their income and not expenses to keep simpler records.
● Taxpayers can be represented by more than one agent or accountant under MTD for ITSA.
Getting ready for MTD for ITSA
With MTD for ITSA being rolled out from April 2026, you have a while to plan and prepare. The first thing you can do, though, is find a cloud-based software that supports MTD, such as Xero or Sage.
Furthermore, we know that this blog post doesn’t contain as much information as we would like. So, you could also research MTD for ITSA more, or better yet, talk to us.
The Langdowns DFK team are well-versed in accounting software and MTD, so we can answer any questions you have and walk you through your future responsibilities so you can get started properly right away.
Get in touch with us today.
