The Making Tax Digital initiative is now familiar territory but, much like any other new scheme, continues to evolve, and more and more taxpayers are beginning to digitalise their taxes. In the most recent update, the government announced a much-appreciated simplification of the MTD processes, which will come into effect from April 2026.
MTD ITSA Is Set To Become Simpler Than Ever
From removing EOPS to cumulative submissions each quarter and restrictions for complex situations, the most recent changes to MTD have been welcomed by taxpayers. Learn more about the updates and how these affect you below:
What Is MTD ITSA?
MTD ITSA stands for Making Tax Digital for Income Tax Self Assessment and is an initiative introduced by the government to modernise and digitalise the UK tax system. It means those required to submit self-assessment tax returns must use MTD-compatible software to keep digital records and submit their tax information digitally. As a result, the government hopes this will make the tax system more efficient, accurate, and easy to manage, meaning there will be less room for error.
What Are The Latest MTD Changes?
From April 2026, taxpayers with a turnover of more than £50,000 will be brought into MTD ITSA. This £50,000 threshold will apply to gross total self-employment and property income, meaning we will include both when determining whether MTD ITSA applies to you. Following this, from April 2027, taxpayers with a turnover over £30,000 will also be brought into MTD ITSA.
HMRC has, however, confirmed that self-employed taxpayers and landlords who turn over under £30,000 will not be brought into MTD ITSA in April 2027. Although taxpayers who fall under this category will be brought into MTD ITSA at some point in the future, the decision will be kept under review in the meantime. We will keep our clients updated with any changes regarding this.
The final update is the announcement that new MTD ITSA exceptions will be implemented for foster carers and those unable to get a national insurance number.
How Will MTD ITSA Be Simplified?
To simplify end-of-year reporting, taxpayers will no longer be required to file an end-of-period statement (EOPS) in addition to the final declaration. Instead, the EOPS will be built into the final declaration process, which will now collate all of the information that would have been reported on the EOPS, along with other data, to calculate the final tax position.
As well as changes to reporting, any quarterly updates produced under MTD ITSA will now be cumulative. This means any errors in previous quarterly submissions can be corrected in the next quarter, rather than having to go back and resubmit earlier reports.
Lastly, in our previous article, we explained the transition from accruals to cash basis. This expansion of the cash basis for calculating taxable profits, along with the above changes, should result in far simpler reporting for MTD purposes.
Need Guidance? Book An Appointment With Our Team
If you’re unsure how the latest MTD ITSA changes will impact you, please do not hesitate to contact our team. We would happily schedule an appointment to discuss your circumstances and put processes in place to ensure that you are submitting your tax accurately.