MTD update

The clock is ticking towards the deadline for Making Tax Digital for Income Tax Self-Assessment (MTD ITSA). On 6 April 2026 the first tranche of businesses and landlords will be required to start keeping their accounting records digitally for income tax purposes. Many businesses already have to use MTD for VAT digital records but these aren’t necessarily compatible for MTD ITSA. To encourage businesses and landlords to prepare for MTD ITSA HMRC launched its pilot a few years ago. It failed to get any traction for various reasons, but primarily because it was unreliable, limited to a small range of taxpayers and the number of approved accounting software providers was extremely small. It seems that all or most of these teething problems have been resolved.

Relaunch

HMRC is promoting its new and improved MTD ITSA test and its wants taxpayers who’ll eventually be required to use MTD ITSA to start using its test system from April 2024. According to HMRC, an advantage to signing up for MTD ITSA at the testing stage is that you’ll have access to a dedicated HMRC team to help with setting up and operating the system. The department has also apparently fixed bugs and improved the design of the MTD ITSA system. Plus there’s now a far greater choice of compatible bookkeeping apps available (including those from the big players in the market such as Xero, Quickbooks and Sage). Full details of other improvements are expected to be published by HMRC shortly and we’ll let you know as soon as they are. In the meantime, if you’re interested in using MTD ITSA, contact your software provider direct or your accountant, who can sign up on your behalf.