A new tax year always feels like a fresh start. New goals, better habits, and a chance to feel more in control of your finances.
But this year comes with a big shift for many sole traders and landlords. Making Tax Digital for Income Tax Self Assessment, known as MTD ITSA, is moving closer, and it is going to change how you report your income to HMRC.
If you are feeling unsure about what it means, you are not alone in this. Many business owners are asking the same questions.
Let’s make it simple and walk through exactly what is changing and what you should be doing now.
What Is MTD ITSA?
MTD ITSA is HMRC’s new system for reporting income if you are self employed or receive rental income.
Instead of sending one tax return each year, you will:
- Keep digital records of your income and expenses
- Send updates to HMRC every quarter
- Submit one final annual submission to confirm everything
That final submission will include:
- Adjustments to your accounts
- Any additional income such as PAYE, dividends, or bank interest
So rather than everything being done in one go at the end of the year, the work is spread out.
When Does MTD ITSA Start?
The rollout is happening in stages, and this is really important to understand.
From April 2026
You will need to follow MTD ITSA if your total income from self employment and property is over £50,000.
From April 2027
This expands to those earning over £30,000.
From April 2028
This expands further to those earning over £20,000.
This means many more people will be affected over time, even if you are not included right away.
Who Needs to Follow MTD ITSA?
You will likely need to comply if you are:
- A sole trader
- A landlord
- Earning above the relevant threshold
It does not apply to:
- Limited companies
- Employees who only earn through PAYE
- Some individuals who qualify for exemption
If your income is growing, it is worth preparing early rather than waiting until you are required.
What Actually Changes?
This is where most people feel confused, so let’s break it down clearly.
Digital Record Keeping
You will need to keep your records digitally using MTD compatible software.
This includes:
- Income
- Expenses
- Dates of transactions
Paper records alone will no longer be enough.
Quarterly Submissions
You will send four updates per year to HMRC.
Each update will include a summary of:
- Income
- Expenses
These updates are not final. They give HMRC an ongoing picture of your business.
Final Annual Submission
At the end of the tax year, you will submit one final report.
This is where everything comes together. You will:
- Make any accounting adjustments
- Confirm your final figures
- Include all other income such as:
- PAYE income
- Bank interest
- Dividends
This replaces the traditional Self Assessment tax return.
What This Looks Like in Real Life
Let’s make this more relatable.
Before MTD ITSA
Many people:
- Keep records throughout the year, sometimes inconsistently
- Leave everything until January
- Feel stressed pulling it all together
After MTD ITSA
You will:
- Keep your records up to date digitally
- Submit quarterly summaries
- Finalise everything once per year
The key difference is that you stay on top of things as you go.
The Benefits of MTD ITSA
It might not feel like it yet, but there are some real advantages.
More Control
You can see how your business is performing throughout the year.
Less Last Minute Stress
No more rushing in January trying to remember what happened months ago.
Fewer Mistakes
Digital systems reduce errors compared to manual entry.
Better Tax Planning
You get a clearer idea of what you owe, which makes budgeting easier.
Common Concerns
This Sounds Like More Work
At the beginning, it can feel that way.
But once you have a system in place, it often becomes quicker and easier than doing everything at once.
I Am Not Good With Technology
You do not need to be an expert.
Most bookkeeping software is designed for beginners. You can also get help setting it up.
Will This Cost More?
There may be some costs, such as software or bookkeeping support.
However, many people find this is balanced out by:
- Time saved
- Fewer mistakes
- Better financial visibility
What You Should Be Doing Now
Even if you are not affected yet, now is the best time to prepare.
Check Your Income
Look at your total income from:
- Self employment
- Property
If you are close to £50,000, £30,000, or even £20,000, it is worth getting ready.
Start Using Software
If you are not already using bookkeeping software, now is the time to explore it.
Popular options include:
- Xero
- QuickBooks
- FreeAgent
Keep Records Regularly
Instead of leaving everything until the end of the year, try:
- Weekly updates
- Monthly reviews
Separate Your Finances
Having a separate business bank account makes everything much clearer.
Get Support
A bookkeeper or accountant can:
- Set up your systems
- Keep everything compliant
- Save you time and stress
Mistakes to Avoid
Waiting Too Long
Leaving this until the last minute will make things harder.
Assuming It Does Not Apply to You
Even if you are under the threshold now, you may not be for long.
Staying Paper Based
Paper records alone will not meet the requirements.
Ignoring Setup
The right setup makes everything easier going forward.
Step by Step Plan
Here is a simple way to get started.
Step 1
Understand your income and whether you will be affected.
Step 2
Choose bookkeeping software.
Step 3
Set up your system properly.
Step 4
Build a regular routine for updating your records.
Step 5
Get help if you need it.
Frequently Asked Questions
Do I still submit a tax return?
You will submit a final annual submission instead of the traditional Self Assessment return.
Will I pay tax quarterly?
No. You report quarterly, but tax payments are still handled separately.
Do I have to do this myself?
No. You can get support from a bookkeeper or accountant.
What happens if I get it wrong?
HMRC may issue penalties for late or incorrect submissions, so it is important to stay organised.
A New Tax Year Is the Perfect Time to Reset
This is a great opportunity to change how you manage your finances.
Instead of feeling overwhelmed at the end of the year, you can stay in control throughout.
MTD ITSA is a big change, but with the right approach, it can actually make things easier.
Final Thoughts
It does not need to be complicated.
You do not need to figure everything out at once.
And you are not alone in this.
With the right support and a simple system, you can stay compliant, reduce stress, and feel more confident about your finances.
Need help with your accounts?
I offer simple, friendly support for sole traders, landlords, and small business owners.
