Making tax digital for Self-Assessment Income Tax with Roake & Cook

Making Tax Digital is a UK government initiative designed to make it easier for individuals and businesses to get their tax right. It's one of the biggest changes to the UK tax system in recent years.

With this change, individuals and businesses will be required to:

• Keep digital records
• Use MTD-compliant software to submit information every quarter

It’s intended to bring the tax system much closer to real-time, whilst giving you an estimate of your tax bill after each submission. The first stage, MTD VAT, has already rolled out – with all VAT-registered businesses now keeping digital records, as well as using MTD software to send their VAT returns. The next stage is for Income Tax Self-Assessment (MTD ITSA).

What are the benefits?

• Fewer mistakes from manual entry
• Easier year-round tracking of finances
• More accurate tax estimates so you can plan and put the right amount to one side
• Potential to save time (and stress!)
• Spot any mistakes more quickly
• A clearer picture of your business finances in real-time

Key deadlines and phases

• From April 2026:
  • Applies to self-employed individuals and landlords with income over £50,000.
• From April 2027:
  • Threshold lowers to £30,000.

MTD for corporation tax:

• Expected no earlier than 2026, but no firm date has been set yet.

Upcoming changes: MTD for income tax

MTD for Income Tax Self-Assessment (ITSA), will take over from the current Self-Assessment system. To comply, you’ll:

• Create digital records for all your business transactions
• Use special software to send quarterly updates of your business’ income and expenses
• Confirm your period-end statements

Once MTD IT is in place, you’ll need to submit quarterly statements, an EOPS (End of Period Statement), and a Final Declaration (which replaces the current Self-Assessment tax return).

When will MTD IT start?

You’ll need to follow the rules for MTD Income Tax if your income from self-employment or property hits the threshold:

• An annual turnover (the amount you get before deducting any expenses or taxes) of more than £50,000 from 6th April 2026
• An annual turnover of more than £30,000 from April 2027
• An annual turnover of more than £20,000 from April 2028

At the moment, there is no confirmed date for partnerships and MTD IT, but it’s expected that they will eventually need to report their finances in this way.

Under MTD for ITSA, you’ll need to:

• Keep digital records of income and expenses
• Submit quarterly updates to HMRC
• Provide an end-of-year final declaration

Is anyone exempt from MTD IT?

You can apply for an exemption against using Making Tax Digital for Income Tax if:

• Due to your age, disability, or location, it’s not practical to keep digital records or submit them
• Your beliefs are incompatible with keeping electronic communications or keeping electronic records due to being a practicing member of a religious society

What should businesses do now?

1. Check if you need to register

1. Check your software – If you're using spreadsheets or paper records, it’s time to switch. Look for MTD-compatible solutions like Xero, Quickbooks or Sage.
2. Review your processes – Make sure your bookkeeping is up to date and accurate. Consider cloud-based tools that streamline invoicing, expense tracking, and tax submissions.
3. Get advice – Speak with an accountant or bookkeeper who understands MTD requirements and can help you transition smoothly.

Adapting to Making Tax Digital is not just about compliance, it’s about modernising your business. By preparing now, small businesses can not only meet HMRC’s requirements but also gain greater financial control and efficiency.