The UK government, through HM Revenue & Customs (HMRC), is introducing a new digital reporting system called Making Tax Digital for Income Tax Self Assessment (MTD for ITSA). This reform will significantly change how tax information is reported going forward.
Below is a simple overview of what the changes mean for you.
What is Making Tax Digital (MTD)?
MTD replaces the traditional once-a-year Self Assessment tax return with regular digital updates submitted throughout the year.
Instead of submitting your tax information once annually, the new system requires:
- 4 quarterly updates summarising income and expenses
• 1 End of Period Statement (EOPS) to finalise business accounts
• 1 Final Declaration confirming all income for the year
This means multiple submissions each year instead of a single annual return.
When Do These Rules Start?
The new system will be introduced in stages:
- From 6 April 2026 – Individuals with self-employment or rental income over £50,000
• From 6 April 2027 – Individuals with income over £30,000
• From 6 April 2028 – Individuals with income over £20,000
Income thresholds are based on combined self-employment and property income before expenses.
Who Will Be Affected?
The new rules apply to individuals who earn income from:
- Sole trader businesses
• Self-employment or freelance work
• UK property rentals
• Landlord income
The changes do not currently apply to limited companies or employees with no additional income.
Quarterly Reporting Requirements
Under MTD, you will submit a digital summary of your business every three months. These reports include:
- Total income
• Categorised expenses
• Basic business information
Only summary totals are submitted individual receipts are not sent to HMRC.
Typical reporting periods will be:
- 6 April – 5 July
• 6 July – 5 October
• 6 October – 5 January
• 6 January – 5 April
Year-End Filings Still Required
Even with quarterly updates, a year-end process will still be required.
This includes:
End of Period Statement (EOPS)
Used to finalise profits and apply accounting adjustments.
Final Declaration
This replaces the traditional Self Assessment return and includes:
- Employment income
• Dividends
• Interest
• Other income sources
The final filing deadline remains 31 January after the end of the tax year.
Digital Record-Keeping Will Be Mandatory
Under the new system, HMRC requires businesses to:
- Keep digital accounting records
• Use HMRC-approved software
• Submit reports directly through accounting software
Paper records or manual entry into HMRC will no longer be permitted.
How This May Affect You
For many taxpayers this means:
- More frequent reporting
• Greater reliance on digital bookkeeping
• Improved visibility of your tax position during the year
While this introduces additional reporting, it also allows for more accurate tax planning and fewer surprises at year-end.
How We Are Preparing
Our firm is currently reviewing all client accounts to ensure everyone is prepared well before the new rules take effect.
Over the coming months we will be:
- Identifying clients affected by the new rules
• Transitioning bookkeeping to compliant digital systems where necessary
• Implementing processes for quarterly reporting
• Providing guidance and support to make the transition as smooth as possible
What You Should Do Now
if you are self-employed or earn rental income, we recommend ensuring your records are kept up to date and digitally where possible.
We will contact you directly if your circumstances require changes before the new system begins.
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