If you’re self-employed or a landlord, you’ve probably heard whispers about Making Tax Digital for Income Tax Self Assessment, or MTD for ITSA as it’s known in the world of accountancy acronyms.
It sounds like yet another bit of government admin to get your head around, but actually, once you understand what’s happening and when, it’s not as daunting as it might seem. And the good news is, we’re here to help you get ready for it.
So what exactly is Making Tax Digital? Essentially, it’s the government’s way of dragging the tax system into the 21st century. Instead of keeping all your receipts in a carrier bag and frantically trying to remember what you earned and spent when it comes to self-assessment time in January, you’ll be keeping digital records throughout the year and reporting to HMRC on a quarterly basis. The idea is that this makes everything more accurate, reduces errors, and means you’re never hit with a nasty surprise at the end of the tax year because you’ve been keeping track all along.
Now, before you panic, this isn’t happening to everyone all at once. The rollout is gradual, and whether it affects you depends on your income level. From April 2026, if your qualifying income is over £50,000, you’ll need to be part of the system. Then from April 2027, the threshold drops to £30,000. If your income is below these levels, you won’t need to worry about MTD for ITSA just yet, though it’s likely the threshold will continue to drop in future years.
What does it actually mean in practice? You’ll need to keep your business records digitally using MTD-compatible software rather than in spreadsheets or paper ledgers. Every quarter, you’ll submit updates to HMRC showing your income and expenses for that period. Then at the end of the tax year, you’ll do a final declaration to wrap everything up. It’s a bit like having four mini tax returns throughout the year instead of one big one at the end.
I know what you’re thinking – this sounds like more work. But honestly, for most people, once you’ve got the right system in place, it actually makes life easier. You’re keeping on top of things as you go rather than facing a mountain of paperwork once a year. You’ll have a much clearer picture of how your business is doing throughout the year, and you’ll know roughly what tax you’re going to owe rather than getting a shock when your accountant tells you the final figure.
The key is getting set up with the right software. At Nene Valley Accountancy, we work with Xero, which is MTD-compatible and really user-friendly. We can offer simple Xero licences at a discounted rate, and then it’s up to you whether you want to handle the quarterly submissions yourself or whether you’d like us to take care of that for you. Some clients love being hands-on with their figures, while others would rather pass it all over to us. Either way works perfectly well.
If you’re thinking you’ll just deal with this when the deadline gets closer, I’d really encourage you to start preparing now instead. Getting your records into a digital system takes a bit of time, especially if you’ve been doing things the old-fashioned way for years. If you wait until March 2026 and you’re suddenly scrambling to get everything sorted, it’s going to be stressful. But if you start now, you can take your time, get comfortable with the software, and be ready to hit the ground running when MTD becomes mandatory for you.
The other thing to remember is that quarterly reporting actually gives you more control over your cash flow. Instead of suddenly finding out you owe a chunk of money to HMRC that you haven’t budgeted for, you’ll know roughly where you stand every three months. You can put money aside as you go, make adjustments to your spending if needed, and generally feel much more in control of your finances.
I won’t pretend that change is always easy, and I know some people feel frustrated that they’re being forced to adapt how they’ve always done things. But having worked with clients who’ve already moved to digital systems, I can honestly say that most of them wonder why they didn’t do it sooner. It saves time, reduces stress, and gives you much better visibility of your business finances.
If MTD is going to affect you in April 2026 or 2027, now is the time to start thinking about it. Get in touch with us and we can have a chat about your situation, show you how Xero works, and get you set up so you’re ready when the time comes. It’s one of those things that feels overwhelming until you actually start doing it, and then you realise it’s absolutely manageable with the right support. That’s what we’re here for – to make sure you’re not just compliant with HMRC, but actually benefiting from having better systems in place for your business.