Making Tax Digital (MTD) is set to expand to cover income tax starting from April 6, 2026. If you’re self-employed with annual earnings exceeding £50,000, you must be prepared for this transition. For some already registered for VAT, the MTD rules for VAT might be familiar territory. Still, it’s prudent to consult a self-assessment accountant to stay comply with the new requirements for MTD for ITSA.
How does MTD affect the self-employed?
Instead of submitting returns via HMRC’s website, you will need to keep digital records and use compatible software that connects to HMRC to submit information. Starting on April 6, 2026, you’ll also need to send quarterly updates to HMRC and submit a Final Declaration for all your taxable income by January 31 each year.
The VAT registration threshold was raised to £90,000 from April of 2024. If your earnings meet or exceed this threshold, you’ll have to register for VAT. Once registered, HMRC will automatically enrol you in the MTD system, ensuring you’re aligned with digital tax reporting standards.
Benefits of MTD for the self-employed
- Automating data entry means bookkeeping records automatically fill your quarterly updates, reducing the risk of human error.
- Submitting quarterly updates gives you a clearer picture of your total tax liability, aiding in tax planning.
- The updates submitted to HMRC are more frequent but contain less information. This allows you to break down bookkeeping into manageable monthly or quarterly tasks.
Do you have to go digital?
If you are eligible, transitioning to digital processes is mandatory. Some exceptions include foster carers and individuals unable to acquire a National Insurance number.
Have a self-assessment accountant assess your eligibility. Our self-assessment accountants at Allenby Accountants are well-versed in MTD legislation and will help you determine whether or not it applies to your business.
Call us at 0208 914 8887 today.
