How self assessment tax returns are changing: MTD for IT

Self-Assessment Tax Returns Are Becoming Digital: What You Need to Know

The Big Change

Tra­di­tion­al­ly, many sole traders, land­lords and peo­ple with income out­side PAYE file a sin­gle annu­al self-assess­ment tax return each Jan­u­ary. But that is chang­ing. HMRC is rolling out the ini­tia­tive called Mak­ing Tax Dig­i­tal for Income Tax Self‑Assessment (MTD for ITSA) which will require dig­i­tal record-keep­ing and more reg­u­lar report­ing.

Key dates include:

• From 6 April 2026, sole traders and land­lords with qual­i­fy­ing income over £50,000 will need to use MTD for ITSA.
• From 6 April 2027, the thresh­old falls to £30,000.
• Lat­er the thresh­old is expect­ed to drop fur­ther to £20,000.
• Impor­tant­ly, you’ll still pay tax as before, but you’ll sub­mit quar­ter­ly dig­i­tal updates instead of sim­ply one annu­al return.

Why This Matters

• More fre­quent report­ing means you’ll be sub­mit­ting updates every three months. This spreads the work­load through­out the year rather than leav­ing every­thing until Jan­u­ary.
• Dig­i­tal record-keep­ing becomes com­pul­so­ry for many. You’ll need tax-soft­ware or com­pat­i­ble tools to log income, expens­es and report to HMRC.
• Poten­tial­ly few­er sur­pris­es. With more up-to-date data, you are less like­ly to be caught out by huge adjust­ments at the end of the year.
• Com­pli­ance risk increas­es. Falling behind on quar­ter­ly updates or using incor­rect soft­ware may lead to penal­ties.
• Oppor­tu­ni­ty to stream­line. For account­ing prac­tices and busi­ness­es there’s a chance to review sys­tems, inte­grate soft­ware, improve tax work­flows and sup­port clients in adapt­ing.

What You Should Do Now

1. Check whether you’ll be affect­ed: If your self-employ­ment or prop­er­ty income is above the thresh­olds, you’ll need to pre­pare. Use HMRC’s tools or speak to your agent.
2. Move to dig­i­tal record-keep­ing now: If you are still using spread­sheets or paper logs, begin migrat­ing to account­ing soft­ware that is MTD-com­pat­i­ble.
3. Update your account­ing soft­ware / prac­tice sys­tems: Ensure your soft­ware provider sup­ports the new regime — e.g., gen­er­ates and sub­mits quar­ter­ly updates.
4. Review your book­keep­ing work­flows: Quar­ter­ly updates mean you’ll want to keep records up-to-date each quar­ter, not just once a year.
5. Edu­cate clients (if you’re an accoun­tant): Let your clients know about these changes ear­ly, what it means for them and how you’re help­ing them adapt.
6. Bud­get for change: There may be costs (soft­ware licences, train­ing, staff time) but also ben­e­fits (less last-minute scram­ble, bet­ter data, smoother year-end).
7. Stay on top of dead­lines: As the regime rolls in, the dead­lines for quar­ter­ly sub­mis­sions will become fixed. Miss­ing them could incur penal­ties.

What About the Annual Self-Assessment Return?

The annu­al tax return isn’t dis­ap­pear­ing imme­di­ate­ly for every­one, but for those required to use MTD for ITSA the process will change sig­nif­i­cant­ly. The return may even­tu­al­ly be replaced by a final dec­la­ra­tion after quar­ter­ly updates.

What This Means for Accounting Firms & Bookkeepers

• You’ll need to guide clients through the tran­si­tion from annu­al returns to reg­u­lar dig­i­tal sub­mis­sions.
• Con­sid­er review­ing clients’ book­keep­ing soft­ware, work­flows and dig­i­tal readi­ness.
• Use this change as a val­ue-add: high­light how dig­i­tal, auto­mat­ed sys­tems reduce errors, save time and give bet­ter insight.
• Be proac­tive: con­tact your clients now, explain the upcom­ing changes and start plan­ning.
• For firms ser­vic­ing man­u­fac­tur­ers, SMEs, land­lords etc., empha­sise how your ser­vice will bridge the gap, man­age com­pli­ance and stream­line process­es.

Final Thoughts

The shift to dig­i­tal tax report­ing through MTD for ITSA rep­re­sents one of the biggest changes to the UK tax sys­tem in decades. While the dead­lines are still a few years away for some, the time to pre­pare is now. Whether you’re a sole trad­er, land­lord, accoun­tant or book­keep­er, ear­ly plan­ning will make the tran­si­tion smoother and avoid dis­rup­tion.

By think­ing ahead, embrac­ing dig­i­tal record-keep­ing and work­ing with trust­ed advis­ers, you’ll be well-posi­tioned to turn a reg­u­la­to­ry change into an oppor­tu­ni­ty for bet­ter finan­cial man­age­ment.