Making Tax Digital for Income Tax Self Assessment (commonly referred to as MTD for ITSA) is one of the most significant changes to the UK tax system in recent years. While the rollout has been gradual, the rules are now approaching reality for many sole traders and landlords.
For business owners who are used to filing a single annual tax return, MTD for ITSA represents a shift towards digital record-keeping and more regular reporting. Understanding what’s changing — and preparing early — can make the transition far smoother.
This guide explains what MTD for ITSA is, who it applies to, and what you should be doing now.
What Is MTD for Income Tax?
MTD for ITSA is part of HMRC’s wider Making Tax Digital initiative, which aims to modernise the tax system by replacing paper records and manual submissions with digital processes.
Under MTD for ITSA, affected taxpayers will be required to:
- Keep digital accounting records
- Use MTD-compatible software
- Submit quarterly updates of income and expenses to HMRC
- Complete an annual final declaration to confirm their tax position
This is a change from the traditional Self Assessment process, which involves submitting a single tax return once per year.
Who Will MTD for ITSA Apply To?
MTD for ITSA will apply to:
- Sole traders with qualifying income above HMRC’s threshold
- Landlords with qualifying UK property income above the threshold
- Individuals with combined business and property income exceeding the threshold
Qualifying income refers to gross income, not profit.
Certain taxpayers will be exempt, including:
- Those below the income threshold
- Some partnerships (for now)
- Individuals who are digitally excluded
If you’re unsure whether the rules will apply to you, it’s worth reviewing your position early rather than waiting for HMRC correspondence.
When Does MTD for ITSA Start?
HMRC is introducing MTD for ITSA in stages.
The current plan is:
- MTD for ITSA will apply first to sole traders and landlords above the income threshold
- Further groups will be brought in at a later date
Although start dates have changed in the past, HMRC has made it clear that MTD for ITSA is going ahead, and preparation is strongly advised well in advance of mandatory compliance.
What Will Businesses Need to Do Under MTD for ITSA?
MTD for ITSA introduces several new requirements:
Digital Records
You’ll need to keep digital records of income and expenses using compatible software, rather than spreadsheets or manual records alone.
Quarterly Updates
You’ll submit four quarterly updates during the tax year. These are summaries, not full tax calculations.
End of Period Statement (EOPS)
At the end of the tax year, each business or property source will need an EOPS to finalise the figures.
Final Declaration
A final declaration replaces the current Self Assessment tax return, confirming all income and tax due for the year.
Although this increases reporting frequency, the final tax position is still confirmed annually.
How Is MTD for ITSA Different from Self Assessment?
Under the current system:
- Records may be kept manually
- One tax return is submitted annually
- Tax liabilities can come as a surprise late in the process
Under MTD for ITSA:
- Records must be digital
- Updates are submitted quarterly
- Tax visibility improves throughout the year
- Final tax is still calculated annually
While this does add administration, many businesses find that better record-keeping leads to fewer errors and better financial awareness.
Common Concerns About MTD for ITSA
Some of the most common questions we hear include:
- Will I have to pay tax quarterly?
No. Updates are for reporting only. Tax is still paid based on the annual final declaration. - Do I need new software?
In most cases, yes. Software must be MTD-compatible. - What if my income changes during the year?
Quarterly updates are not final — adjustments are made at year end. - What if I’m not confident with technology?
Support is available, and exemptions may apply in certain circumstances.
How to Prepare for MTD for ITSA Now
Even if MTD for ITSA is not yet mandatory for you, early preparation makes a significant difference.
We recommend:
- Reviewing whether your income is likely to fall within scope
- Moving bookkeeping onto cloud accounting software
- Improving record-keeping habits throughout the year
- Getting professional advice before deadlines approach
Many clients choose to align this with ongoing bookkeeping and cloud accounting support, rather than managing the transition alone.
How Atreus Accountants Can Help
At Atreus Accountants, we help sole traders and landlords across London and the UK prepare for MTD for ITSA with practical, straightforward advice.
Our support includes:
- Assessing whether MTD for ITSA will apply to you
- Setting up MTD-compatible accounting software
- Ongoing bookkeeping and quarterly reporting
- Self Assessment and final declarations
- Clear guidance at every stage
For many clients, MTD for ITSA becomes far more manageable when it’s part of a wider Self Assessment and compliance service rather than an added burden.
Preparing Early Makes All the Difference
MTD for ITSA represents a change in how tax information is reported, but it doesn’t need to be disruptive. With the right systems and support in place, it can lead to better financial visibility and fewer last-minute pressures.
If you’d like help understanding how MTD for ITSA will affect you, or support preparing for the changes, get in touch with Atreus Accountants to discuss your position.