Written by Director of Transformation, Russell Frayne
If you’re a sole trader or landlord earning more than £50,000, you can expect to hear from HMRC about Making Tax Digital (MTD) from April 2025. Letters are being sent out to raise awareness and help taxpayers prepare ahead of the start date in April 2026. If you fall into this group, it’s a good idea to start planning now. Here’s what you need to know about this next stage of MTD.
Read more about the wider changes here.
What is making tax digital for income tax?
Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is HMRC’s plan to modernise the tax system. It requires affected taxpayers to keep digital records and use compatible software to submit quarterly updates to HMRC.
Rather than filing an annual tax return, you’ll send quarterly updates showing your income and expenses. At the end of the tax year, you’ll submit an end-of-period statement along with a final declaration. Together, these will effectively replace the Self Assessment return you may be used to. You can find more detail about the process on HMRC’s website.
Who will be affected first?
From April 2026, MTD for ITSA will apply to sole traders and landlords whose combined business and/or property income is more than £50,000. If your income falls between £30,000 and £50,000, you’ll be brought into the system a year later, from April 2027.
Partnerships and limited companies will be included at a later stage. The government has yet to confirm when that will be.
HMRC is sending letters to taxpayers who are likely to fall within the first group. The goal is to give people time to prepare their records and processes well before the rules come into force.
What do you need to do now?
If you’re in scope, it makes sense to start preparing sooner rather than later. HMRC recommends that affected taxpayers:
- Keep digital records of income and expenses
- Use compatible software to submit quarterly updates to HMRC
- Get familiar with quarterly reporting and the new end-of-year process
There’s no need to sign up for MTD for ITSA yet unless you’d like to volunteer for HMRC’s pilot scheme. The pilot is currently open to certain sole traders who meet specific eligibility criteria.
What software do you need?
To meet the requirements of MTD for ITSA, you’ll need software that is compatible with HMRC’s systems. There’s already a wide range of options on the market, and more are becoming available. Some offer extra features like invoicing and bank feeds, while others focus solely on record-keeping and reporting.
We can help you choose the right software for your business and support you in setting it up.
How Gravita can help
We’re already helping clients move to digital record-keeping and get ready for MTD for ITSA. Whether you need advice on choosing software, support with quarterly reporting, or a more hands-off service where we take care of the process for you, we’re here to help.
If you’d like to find out how MTD for ITSA will affect you and what you need to do to stay compliant, get in touch with Director of Transformation, Russell Frayne.
