Making Tax Digital for Income Tax: Your Friendly Guide
Tax. The very word can sometimes send shivers down your spine! But what if we told you there’s a way to make things a little less… taxing? Enter Making Tax Digital for Income Tax & Self-Assessment (MTD f ITSA)!
Now, before you click away, hear us out. This isn’t about making tax more complicated. It’s actually about bringing your tax admin into the digital age, which in the long run, can save you time and reduce errors. What’s more, if you work through Taxfile, it could also save you money! Think of it as upgrading from paper maps to Google Maps for your finances!
If you work through Taxfile, it could save you money!
So, what exactly is MTD for Income Tax?
Making Tax Digital for Income Tax & Self-Assessment is a government initiative that affects self-employed individuals and landlords/ladies with a total business and property income above a certain threshold. It requires them to keep digital records of income and expenses and send quarterly updates to HMRC using MTD-compatible software*.
Who needs to get on board?
- For the 2026/27 tax year, the rules apply to those with a total gross income (turnover) from self-employment and/or property exceeding £50,000 per year.
- For the 2027/28 tax year, it will apply to those with a turnover greater than £30,000 and …
- For 2028/29 it will affect those with a turnover of £20,000 or more.
If any of these apply to you, then MTD for Income Tax is something you’ll need to familiarise yourself with — but Taxfile can help!
Instead of one big tax return at the end of the year, MTD requires you to send updates every quarter. Think of it as breaking down the task into smaller, more manageable chunks. These updates will provide HMRC with a summary of your income and expenses for that three-month period.
Why the switch to digital?
HMRC believes that going digital will:
- Reduce errors — let’s face it, manual data entry can be prone to mistakes. Digital records can help minimise these.
- Make tax management easier — regularly updating your records can give you a clearer picture of your business’s financial health throughout the year, not just at the tax deadline.
- Potentially reduce stress — knowing you’re keeping on top of things digitally can be a weight off your mind!
*Do You Need to Buy MTD-Compatible Software?
The key to MTD for Income Tax is using compatible software. The software allows users to keep digital records of income and expenses, submit quarterly updates to HMRC, and view tax information in one place. There are various software packages available. While some are free for those with simple needs, others offer more advanced features. HMRC estimates the additional cost to the taxpayer at £338 as a one-off administrative burden and then an additional £100 each year following. However, Taxfile has a way for you to potentially avoid such additional software costs, explained below.
“Taxfile has a way for you to avoid such software costs”
Taxfile’s Solution — What to Do
At Taxfile, with our in-house software skills for various MTD packages, we believe that the taxpayer needs only to provide us with their business transactions (income & expenditure) in a simple spreadsheet each quarter — we’ll then take on the additional responsibility. Working through Taxfile, MTD can be that simple!
“Simply supply us your quarterly income & expenditure transactions in a spreadsheet — we’ll do the rest!”
If you would like to speak to us about MTD, have any concerns, or would like some advice, we offer free consultations. We are happy to help whenever we can, so just drop into our office, book an appointment, or give us a call on 020 8761 8000.
Taxfile are accountants and tax advisors based in Tulse Hill, London SE21.
