Making Tax Digital for income tax (MTD ITSA) has been coming for years. It is finally arriving, in stages. The phase-in matters because the difference between “you’re caught next April” and “you’ve got another two years” is the difference between buying software now and not.
This is a deliberately short note. Specific thresholds shift, so I won’t quote numbers that may be out of date by the time you read it — confirm with me, or with HMRC’s current published guidance, before you act on this.
Who is caught, broadly
Sole traders and landlords above the qualifying income threshold. The threshold is being tightened in stages. Higher-income individuals were brought in first; the threshold then drops, drawing in progressively smaller traders.
What MTD ITSA requires is, in essence: digital record-keeping, quarterly submissions to HMRC of summary income and expense figures, and a final declaration at the end of the year. It does not require quarterly tax payments.
What people are panicking about that they shouldn’t
You don’t need to switch your entire accounting setup tomorrow. If you’re using spreadsheets that work, bridging software can connect them to HMRC. You don’t need to buy a £30/month subscription unless one is genuinely useful for your business.
You also don’t need to file four near-final tax returns a year. The quarterly submissions are estimates — they aren’t a tax return four times over. The final declaration is where the real numbers settle.
What’s worth doing now
Confirm whether you’re caught in the current phase or a later one — that’s the question that actually decides timing. Look at how your records are kept today and whether they could meet the digital-records requirement without much change. If you’re a landlord with several properties, the bookkeeping question is bigger than for a sole trader with one income stream, and worth thinking about earlier rather than later.
The thing I’d avoid is signing up to a piece of software because a marketing email said you had to. Most of the noise around MTD comes from the people selling the cure. The disease is real but the prescription should match your actual situation.
If you’d like a sanity check on where you sit, that’s a quick conversation.