Tag: digital record keeping

From April 2026, the biggest shake-up to Self Assessment in decades begins. If you’re a sole trader, landlord, or anyone with significant untaxed income, the way you report to HMRC is about to change.

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) will gradually replace the current Self Assessment system for certain taxpayers. Expect more frequent digital updates, new record-keeping rules, and a change in how you file.

In this guide, Rosie Cooper – MTD specialist and cloud accounting director – explains what’s staying the same, what’s changing, and how to prepare.

Who will MTD apply to first?

Under the current Self Assessment rules, you must file a tax return if you have untaxed income over £1,000. That includes income from self-employment, rental property, or certain directorships.

From April 2026, MTD will apply to individuals whose total qualifying income from self-employment or property exceeds £50,000 a year. One year later, in April 2027, the threshold will drop to £30,000.

Some people will still be exempt, such as those with no internet access or certain health conditions. HMRC may also grant additional MTD-specific exemptions in limited circumstances.

Find out more about exemptions here.

How often will I need to report?

Self Assessment currently involves submitting a single tax return each year, due by 31 January after the end of the tax year.

With MTD, you’ll be reporting far more regularly. You will send HMRC four quarterly updates – each due within a month of the quarter’s end – followed by a final declaration by the usual 31 January deadline. This means your tax position will be kept up to date throughout the year, rather than calculated only once annually.

What will change in my record keeping?

One of the biggest differences is how you’ll keep your records. At the moment, Self Assessment allows you to use paper records, spreadsheets, or accounting software.

Under MTD, digital record keeping becomes mandatory. You will need to use HMRC-compatible software (or bridging tools for spreadsheets) to store your records and send updates. Instead of keeping only annual totals, you’ll be expected to maintain transaction-level details – including dates, amounts, categories, and descriptions.

How will I file my updates?

Currently, you can log into HMRC’s online portal or even submit a paper return. Under MTD, all submissions will be sent directly from your accounting software to HMRC. While HMRC has not yet announced a hard cutoff date for retiring the online portal, the transition plan implies that:

• From April 2026, individuals with income over £50,000 from self-employment or property will need to use MTD-compatible software.
• From April 2027, the threshold will lower to £30,000.
• The portal will likely remain available for those not yet required to use MTD, such as individuals below the threshold or those with exemptions (e.g. no internet access, certain health conditions).

So, while the portal won’t be shut down immediately, its use for Self Assessment will be increasingly limited to exempt individuals and those below the MTD threshold.

If you make an error, you won’t submit an amendment as you do now. Instead, you’ll correct it in a later update or in the final declaration.

Self Assessment vs MTD – at a glance

                                            Self Assessment                                       MTD for ITSA

Who files?                      £1,000+ untaxed income                              Those with income over £50,000 from 2026, decreasing to £30,000 from 2027

Exemptions                    Age, disability, no internet access                 Same + limited MTD-specific exemptions

Frequency                      1 return per year                                           4 quarterly updates + final declaration

Deadlines                       31 January                                                   Quarterly: 1 month after quarter-end + 31 January final declaration

Record keeping             Paper, spreadsheets or software                  Digital records via compatible software

Filing method                HMRC portal or paper                                  Direct via software

Corrections                   Amend within 12 months                              Correct in later update or final declaration

 

What does this mean for you?

Switching to MTD means swapping one big annual deadline for several smaller ones. For many, this will encourage better cash flow planning, as you’ll be working with more current tax information. It also allows errors to be spotted and fixed sooner, rather than discovering them at year-end.

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) offers a significant advantage to taxpayers by enabling real-time capture of expenses through quarterly submissions. This proactive approach helps individuals maintain accurate and up-to-date financial records throughout the year, reducing the risk of missing deductible expenses or misreporting figures. By regularly logging costs as they occur, taxpayers can ensure that all allowable expenses are accounted for, potentially lowering their taxable income and, in turn, the overall tax due. This shift from annual to quarterly reporting encourages better financial discipline and can lead to more informed tax planning decisions.

Some things won’t change – you’ll still declare all your income to HMRC, the 31 January payment deadline will remain, and you can still claim allowable expenses and reliefs.

How to prepare for the change

The earlier you prepare, the smoother the transition will be. Start by checking your income level to see whether you’ll need to comply from 2026 or 2027. Choosing HMRC-compatible software is the next step – our MTD specialists can help you find the best fit for your business.

Once you’ve gone digital, give yourself time to get used to quarterly reporting. Setting reminders and putting clear processes in place will help ensure you never miss a deadline. And if you’d rather not handle the change alone, our MTD team is here to guide you through the entire process.

Join us at our MTD drop-in days

To help you prepare, we’re hosting two free drop-in days where you can speak directly with one of our MTD specialists about any queries you may have – no appointment needed.

Thursday 25 September – Blackburn office (New Century House, Greenbank Technology Park, Challenge Way, Blackburn, BB1 5QB)

Tuesday 30 September – Bury office (First Floor, Sandringham House, Hollins Brook Park, Pilsworth Road, Bury, BL9 8RN)

Both sessions run from 10am to 4pm. Throughout the day, our team will be on hand to answer your questions on how MTD for ITSA will affect you, what digital records you’ll need to keep, the software options available, and how to make the transition to cloud accounting as smooth as possible. These events are open to everyone – whether you’re a sole trader, landlord, or part of a finance team – so feel free to drop in for a brew and a chat.

Get ready now – avoid the last-minute rush

MTD for ITSA doesn’t change what you report, but it completely changes how and when you do it. With the right tools and advice, the move from once-a-year reporting to year-round updates can lead to better financial control and fewer surprises at year-end.

Don’t wait until the new rules take effect – start preparing now. Email enquiries@pmm.co.uk to speak with our MTD experts and get ready for the change.