Starting April 2026, Making Tax Digital for Income Tax Self Assessment (MTD ITSA) will bring significant changes to how self-employed individuals and landlords report their income tax. This initiative by HMRC aims to make tax reporting more efficient, accurate, and easier to manage through digital tools.
If you’re self-employed or a landlord with an annual turnover over £50,000, these changes will apply to you from April 2026. If your turnover is between £30,000 and £50,000, you will need to comply starting April 2027. Those with turnover under £30,000 will be exempt from MTD ITSA for now.
What is MTD ITSA?
MTD ITSA is a government initiative that will require affected individuals to:
- Keep digital records of their income and expenses.
- Submit quarterly updates to HMRC instead of an annual Self Assessment tax return.
- Use compatible accounting software to manage records and submissions.
For more information, visit the official HMRC MTD ITSA page.
Key Changes and What They Mean for You
Quarterly Tax Reporting: Instead of filing a tax return once a year, you’ll submit financial updates every three months.
Digital Tax Records: Paper records will no longer be sufficient; you must use HMRC-approved software such as Xero.
End-of-Year Tax Finalisation: After the four quarterly updates, a final declaration will be required to ensure your tax liability is correct.
Accountant Requirement: You will need an accountant to submit your returns under MTD ITSA, ensuring compliance with all HMRC regulations.
How Will MTD ITSA Affect Landlords?
As a landlord, MTD ITSA will impact how you report rental income and expenses. Whether you own one property or multiple, keeping digital records and submitting quarterly updates will become mandatory.
Key points for landlords:
- Ensure all rental income and allowable expenses are recorded digitally.
- Use accounting software to streamline tax submissions.
- Seek professional advice to stay compliant and avoid penalties.
When Will You Be Affected?
| Annual Turnover | MTD ITSA Start Date |
| Over £50,000 | April 2026 |
| Between £30,000-£50,000 | April 2027 |
| Under £30,000 | Exempt (for now) |
How to Prepare for MTD ITSA
We are currently reviewing your situation to determine when you’ll be impacted and whether you’re already compliant. Expect a follow-up email from us soon with a personalised action plan.
In the meantime, here are some steps you can take to prepare:
Contact Neon Accounting for expert support in transitioning to MTD ITSA and ensuring you meet all requirements smoothly.
Start using MTD-compliant accounting software such as Xero, which we highly recommend for its ease of use and compliance features.
Organise your tax records digitally, ensuring all income and expenses are accurately logged.
Example Scenarios
Example 1: Compliance for Self-Employed Individuals John is a self-employed plumber with a turnover of £55,000.
- John will need to comply with MTD ITSA starting April 2026.
- He must start using compatible accounting software like Xero to submit quarterly updates.
- By preparing early, John avoids last-minute stress and potential penalties.
Example 2: Compliance for Landlords Sarah is a landlord with a turnover of £40,000.
Using accounting software like Xero helps her stay compliant effortlessly.
Sarah’s compliance deadline is April 2027.
She must ensure rental income and expenses are digitally recorded and reported.
Why Choose Neon Accounting for MTD ITSA Support?
We are here to assist you throughout this transition. Our team at Neon Accounting will guide you in choosing the right software, such as Xero, and ensuring a smooth compliance process. Expect a follow-up communication detailing your next steps.
If you have any immediate questions, contact Neon Accounting today for expert guidance on MTD ITSA compliance.
