Are you ready for MTD ITSA?

MTD ITSA - Making Tax Digital for Income Tax Self Assessment

Sole traders, the self-employed and landlords with income of £50,000 or more will be required to submit quarterly returns to HMRC from April 2026.  If you are at or exceed this threshold you should have received a letter from HMRC advising you that you need to do these quarterly returns. 

From April 2027 the threshold for submission of these quarterly returns reduces to £30,000 of income and from April 2028 it will be £20,000 of income.

What is income?

Income means the amount you receive before any deductions.  So if you are a landlord and have management fees deducted from your rental income your income is the rent amount and not the amount you are paid.  If you are self-employed and receive income from a selling site your income is the amount you sell your item for and not the amount you receive from the selling site which will have deducted their fees.  If you are a sole trader providing services your income is the amount you charge your customer and not the amount of money you make after expenses.

What do you need to do

You will need to use some form of software to maintain digital records of your income and expenses so that you can submit these returns electronically to HMRC.  You could use a spreadsheet and then purchase some bridging software to submit the returns if you are doing it yourself but it would be much easier to do everything from one platform.

If you are VAT registered you will probably already be using software to submit your returns and this software is likely to have the ability for you to submit quarterly returns from April 2026 (many are still developing their software but say they will have it ready for then).

You will need to keep your accounts up to date for each quarter so that your quarterly submission is as accurate as possible.  The Xero software we use will show you a tax calculation each quarter so you will have an idea of the tax you will need to pay.  This comes directly from HMRC but obviously won't take into account any additional income which may be reported at the year end.

What do we do?

We have been bookkeepers for many years and dealing with the HMRC changes over the years are what we do for our clients.  First it was MTD VAT back in 2019 and now MTD ITSA in 2026.  We use Xero software for our clients which will have the quarterly returns available to use from April 2026.  We can complete your bookkeeping for you on a monthly or quarterly basis and submit the 4 returns.  We use Hubdoc which is free software that connects to Xero to receive electronic documents which are then attached to the relevant transaction in Xero.  This is digital record keeping and means no filing of paperwork!

As we are not accountants and don't have the necessary knowledge or experience to advise you on personal or business tax matters your final 5th return will be completed by your accountant from the accounts data we provide them with.  This 5th return is equivalent to a normal tax return and is completed after the year end and before 31st January the following year.  The 5th return will bring in any additional income that needs to be reported and will have any adjustments needed to the previously submitted information.

We can therefore help you meet the mandatory requirement of submitting quarterly returns by using appropriate software and ensuring your accounts records are up to date so that each submission is an accurate reflection of your trading for the period.

Can I do it myself?

Yes.  If you currently do your own accounts and use compatible software to keep digital records and that software will include the ability to submit the quarterly and final updates there is no reason you can't do this yourself.  However if you have an accountant to do your year end accounts you should check with them what they recommend.

You will need to register with HMRC to submit returns under MTD ITSA before you can submit anything through your software.

Using Xero

If you are using or choose to use Xero from April 2026 for preparation and submission of these quarterly updates you will be able to submit separate quarterly returns from one subscription for different income streams or for jointly owned property income.  Xero has different subscription levels depending on your need but all will have this option available.

Need more help?

If you think it is time to get more efficient with your bookkeeping to avoid the inevitable penalties of late filing of quarterly returns and get peace of mind contact us now to see if we can help your business.   Call our bookkeeping team on 01722 341820.