The UK tax system is evolving, and if you’re self-employed or a landlord, these changes could significantly impact how you manage your finances. Making Tax Digital for Income Tax Self-Assessment (MTD IT) is set to modernise the way you report income and expenses, ensuring a more streamlined and efficient tax process.

What is MTD IT?

MTD IT is part of the government’s Making Tax Digital (MTD) initiative, aimed at reducing errors and improving efficiency. It requires self-employed individuals and landlords to keep digital records and submit quarterly tax updates instead of an annual tax return.

This change affects:
✅ Self-employed individuals
✅ Landlords with annual rental income

Key Changes Under MTD IT

To comply with MTD ITSA, you will need to:

1. Keep digital records of your income and expenses using MTD-compatible software.
   2. Submit quarterly updates to HMRC, rather than one annual tax return.
   3. File an End of Period Statement (EOPS) and a Final Declaration to confirm your income and tax obligations.

Who Needs to Comply & When?

📅 April 2026 – MTD IT applies to those with a turnover over £50,000 per year.
📅 April 2027 – Those with a turnover between £30,000 and £50,000 will need to comply.

HMRC is still considering how these rules will apply to individuals with a turnover below £30,000.

How Will MTD IT Affect You?

🔹 Digital Record-Keeping: If you currently use spreadsheets or paper records, you’ll need to transition to digital bookkeeping.
🔹 Quarterly Reporting: You’ll submit four quarterly updates yearly instead of one tax return.
🔹 Year-End Finalisation: You’ll still need to confirm your total income and tax position at the end of the tax year.
🔹 More Transparency: Regular updates mean fewer surprises when it comes to tax liabilities.

How to Prepare for MTD IT

✅ Check if MTD IT applies to you based on your turnover.
✅ Choose MTD-compatible software like Xero, QuickBooks, or FreeAgent.
✅ Organise your records and move towards a digital system.
✅ Learn the new process of quarterly updates and year-end submissions.
✅ Get professional advice to ensure compliance and a smooth transition.

How Figure Fairy Can Help

At Figure Fairy, we’re here to make your transition to MTD IT as simple as possible. Our expert team can:
✔️ Help you choose and set up MTD-compliant software.
✔️ Provide training and ongoing support.
✔️ Assist with quarterly tax submissions and year-end reporting.

Don’t wait until the last minute—get ready for MTD ITSA today! If you need support, contact Figure Fairy for expert advice on navigating these changes smoothly.