The 2025 Spring Statement included numerous announcements affecting Making Tax Digital for Income Tax Self-Assessment (MTD ITSA). If you’re self employed or you let a property, what do you need to know?
April 2028 expansion
If you’re a sole trader or landlord and not exempt from Making Tax Digital for Income Tax Self-Assessment (MTD ITSA), your combined trading and property income (not profit) will dictate when you’ll need to start keeping digital records and sending quarterly reports to HMRC. The Spring Statement extended the MTD ITSA regime to very small businesses with effect from April 2028. You’ll need to register and start using it if your turnover exceeds £20,000 for the 2026/27 tax year.
Tip. The good news is that the Chancellor made no mention of partnerships in her statement. This means they almost certainly won’t come within the scope of MTD ITSA until April 2029 or later.
Timetable and exceptions
With one exception, the dates for sole traders and landlords with higher turnovers remain unchanged, i.e. April 2026 for those with 2024/25 income exceeding £50,000 and April 2027 where 2025/26 income exceeds £30,000. However, non-domiciled individuals are not required to use MTD until April 2027 even where their income exceeds £50,000 in 2024/25.
Tip. If you elect to use reporting per calendar quarter instead of tax year quarters, you must start MTD from the relevant 1 April rather than 6 April.
Exemptions and deferrals
The existing exemptions from MTD (those that apply for VAT) will apply to non-UK resident entertainers and sports persons, if you’re acting as a power of attorney for a sole trader/landlord or if “HMRC cannot provide a digital service” to you. This last category will mainly affect anyone who doesn’t have a reliable internet connection.
In addition, MTD ITSA will not apply until at least 2029 to ministers of religion, Lloyd’s underwriters anyone claiming blind person’s allowance or married couple’s allowance.
Year-end process
As the current HMRC self-assessment service will be withdrawn from 2026/27, you will be required to report all other income, e.g. savings interest, dividends and relevant outgoings, e.g. pension contributions, using the end-of-year routine included in the software you use for making your quarterly MTD reports. Although this has the laudable aim of simplifying the reporting process, there are concerns over software capability, reliability and cost as this is a new requirement which has not already been factored in.
Tip. When buying MTD-compatible software make sure it’s appropriate for your business and can also transmit your completed tax return to HMRC. If it doesn’t you’ll have the headache of deciding whether to buy yet more software which will need to be integrated with your existing system, or change software provider altogether.
Tip. Bridging software apps are available and more are expected. If you use spreadsheets for your digital bookkeeping, bridging software makes them MTD compliant.
MTD ITSA will apply to you from April 2028 if you’re a sole trader or landlord with turnover over £20,000. However, more exemptions have been added. Unless your income will be below £20,000 in 2026/27, start planning for MTD now. Make sure your choice of MTD software can cope with the tax return submission process.
The next step
List of available software
HMRC’s statement on exemptions
This article has been reproduced by kind permission of Indicator – FL Memo Ltd. For details of their tax-saving products please visit www.indicator-flm.co.uk or call 01233 653500.