How will I be affected by Making Tax Digital for Income Tax (MTD for ITSA)?

Paula Veysey-Smith • 23 March 2025

HMRC are starting to send out letters to sole traders and landlords in the initial steps towards Making Tax Digital for Income Tax. If you receive one of these letters do not panic, help is at hand. So let’s answer your most asked questions about Making Tax Digital.

What is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax (MTD for ITSA) is a UK government initiative aimed at modernising the tax system. It will require individuals and businesses to keep digital records and submit tax information to HMRC using compatible software. It is part of a broader initiative to digitalise tax returns and follows on from the changes already implemented for VAT reporting.

Will Making Tax Digital affect me?

MTD for ITSA will affect individuals who:

Are self-employed (e.g. sole traders) and/or landlords (earning income from property).
Have a total income over £50,000 per year (combined from self-employment and property).
Are currently required to complete a Self-Assessment tax return.

From April 2026, MTD for ITSA will be mandatory for those earning over £50,000.

From April 2027, this threshold will reduce to £30,000.

What will I have to do if my earnings are over the threshold?

You will need to keep digital records for income and expenses which will mean using MTD compatible software. This will be a major change for those of you still keeping paper records.

Instead of submitting an annual self-assessment return you will need to submit quarterly updates 4 times a year to HMRC. At the end of the tax year an End of Period Statement (EPOS) and a Final Declaration will need to be submitted which essentially replaces the current Self-assessment return. All of these will be required digitally, paper records and manual calculations will no longer be accepted.

This means that instead of 1 annual return you will need to make 6 submissions!

So what software do I need to use to keep digital records?

Acceptable software include:

QuickBooks
Xero
FreeAgent
Sage
or, HMRC-recognised spreadsheet tools with bridging software (not highly recommended)

No more shoeboxes of receipts or manual books — everything must be digitally recorded.

When will I need to register for MTD?

You’ll need to sign up for MTD for ITSA before April 2026. This is a deadline and not a target, signing up early is always advisable. HMRC will provide a service for you to do this but having the guiding hand of an accountant will make this a much easier task.

MPower Accounting is that help at hand for you!

We already have a sound understanding of Making Tax Digital and use all the acceptable software mentioned above. We realise that for many the prospect of MTD, keeping records digitally and having to make 6 submissions a year is daunting, if not downright scary. Let us be that helping hand and guide you through the process of registering for MTD and setting up your digital records to make those 6 submissions seem effortless.

Give us a call to discuss on 01892 234353

or email us here: welcome@mpoweraccounting.com

HMRC mileage rate increase 2026 -- car dashboard representing business travel costs

HMRC Increases Mileage Rate to 55p Per Mile

by Paula Veysey-Smith • 5 June 2026

HMRC has increased the Approved Mileage Allowance Payment rate from 45p to 55p per mile for the first time in 15 years. Find out what the new rates mean for employees, directors and self-employed individuals from 6 April 2026.

M is for Measurable

by Paula Veysey-Smith • 31 May 2026

You've made your goal specific. Now how do you know you're actually getting there? The answer is in the M. "The more you can define your goals, the more likely you are to achieve them." Last time we looked at S for Specific — turning vague wishes like "I want to get fit" into something concrete and actionable. If you missed it, go back and start there, because everything builds on that foundation. Now we move to M for Measurable. And this one is just as important, because a goal without a measure is still just a wish.

S is for Specific

by Paula Veysey-Smith • 3 May 2026

Your New Year’s resolutions haven’t failed, they just need a sharper edge. Here's how one simple shift can change everything. “We make New Year's resolutions — let's call them goals. But they can be a bit vague. The way to make them happen is to actually define them better.” It's that time of year when those bold January intentions have quietly faded into the background. "Get fit." "Lose weight." "Grow my business." Sound familiar? You're not alone — and more importantly, you haven't failed. Your resolutions just need a better framework.

MTD for Income Tax Is Here: What It Means for You

by Paula Veysey-Smith • 13 April 2026

HMRC’s new system Making Tax Digital for Income Tax Self-Assessment has now arrived! This isn’t just a regulatory update. It’s a shift in how your records are kept, how often you report, and what you will need to do throughout the year. What’s changing for you: Under MTD for Income Tax, if you’re a sole trader or landlord within scope: You’ll need to keep digital records Quarterly updates will need to be digitally submitted to HMRC An End of Period Statement (EOPS) will need to filed A Final Declaration will be needed to finalise your tax position for the year In short: instead of one annual deadline, your tax reporting becomes a year-round process. Why using compliant bookkeeping software is now essential? To meet MTD requirements, HMRC requires fully digital record keeping and submissions . Manual spreadsheets alone are no longer sufficient You’ll need to use MTD-compliant bookkeeping software Sending your accountant paper records or incomplete information will cause delays The upside (it’s not just compliance) While MTD is mandatory, it also brings real benefits: Clear visibility of your tax position throughout the year Better cash flow planning Fewer surprises at year-end What support do you need to navigate this new system? The support of qualified accounting professionals is now more necessary than ever. We don’t expect you to navigate this alone and here’s how MPower Accounting can ensure that you not only comply with, but thrive under, this new reporting requirement. We’ll help you choose and set up the right software We work with trusted platforms such as Xero, QuickBooks, FreeAgent and others. We’ll recommend what fits your business best and get everything set up correctly. We’ll ensure you stay compliant Review your records regularly Submit your quarterly updates accurately and on time Handle all year-end submissions We’ll take the stress off your shoulders With the right system in place: Your records stay up to date automatically We can spot issues early You avoid last-minute pressure and surprises All we’ll need from you to make MTD work smoothly, is access to your chosen bookkeeping software, regular uploaded receipts so we can keep records current and a little of your time when there are questions. The more up-to-date your records are, the more value and proactive advice, we can provide. Your role is simple but important. Letting us take the strain of compliance will save you time and cause significantly less stress, enabling you to focus on what is important, that is running your business successfully. Next steps If you haven’t already: Speak to us about getting set up on MTD-compliant software Let us review your current bookkeeping process Make sure you’re ready for quarterly reporting