Making Tax Digital (MTD) is the Government’s effort to digitise the tax system by requiring VAT, self-assessment and corporation tax payers to file an online tax return online, among other duties.
While MTD for VAT has been in operation for some time, the transition for certain income tax self-assessment (ITSA) payers is on the horizon. Despite the system experiencing multiple delays, it’s crucial to remain proactive and ready for the impending shift scheduled for April 2026.
What does MTD ITSA mean for accountants and bookkeepers?
Under MTD ITSA rules, those who are self-employed and landlords earning above £50,000 will need to submit quarterly updates, one end-of-period statement and a final declaration each tax year from April 2026. To do this, they will need MTD-compatible software for record-keeping and sending updates to HMRC.
How to prepare for MTD ITSA
Embrace MTD-compliant software
MTD requires the use of software, for which you have some options, including the big names in accounting software, such as Xero and Sage. However, you can also use offline software as long as it connects to HMRC’s systems through an API.
The idea is that your software will send your financial information straight to HMRC, making submissions of income and expenses for tax purposes simpler.
Update your digital record-keeping practices
Under MTD ITSA, digital records will not simply be the norm – they will be a requirement, so why not prepare for the change by getting used to the practice?
Train your team
To be successful with MTD, you should invest in training for yourself and your staff to ensure everyone knows the new requirements and your chosen accounting software.
The best sources of training include software providers themselves or your accountant, many of whom offer training and tutorial services.
Consult with accounting professionals
Ultimately, MTD represents a significant shift in your accounting system. It’s advisable to consult with your accountant regarding these impending changes. This not only ensures that your accounting practices remain current but also enhances the efficiency of your financial processes.
Check for software integration
If your first time using cloud accounting software is because of MTD, be aware that you can use it for a lot more than just MTD – from payroll to financial management and sometimes even warehouse management.
So, get to know your software and talk to your accountant about the benefits of cloud-based accounting software.
Test submissions in advance
To avoid last-minute surprises or disruptions, you could always conduct test submissions well before the MTD ITSA deadlines. This proactive approach allows you to identify and address any issues in your digital record-keeping and submission processes.
Stay informed about updates
The plans for MTD ITSA are always changing, so keep an eye on the news and your accountants’ communication to learn about the latest developments.
Continuously review processes
As you approach and move beyond April 2026, take the opportunity to scrutinise your processes and ensure they are functioning optimally.
By proactively addressing these steps, your business can pave the way for a seamless transition to MTD ITSA.
Embracing digital record-keeping practices, investing in training, and staying informed about updates will not only ensure compliance but also position your business for increased efficiency and resilience in the digital age of taxation.
Talk to us about MTD ITSA – we’ll help you get set up.