Making Tax Digital for Income Tax: What You Need to Know Before April 2026
A major change is coming to tax reporting — are you ready?
From April 2026, Making Tax Digital for Income Tax Self Assessment (MTD ITSA) becomes mandatory for thousands of businesses and landlords across the UK. At Merranti Accounting, we are launching a cost-effective new digital system to ensure our clients stay compliant — with minimal hassle and flexible packages.
Whether you’re a sole trader, landlord, or both — now is the time to prepare.
What is MTD for Income Tax?
MTD ITSA is part of HMRC’s wider digitalisation of the UK tax system, designed to improve accuracy and reduce the tax gap. Under this new system, affected taxpayers will:
- Keep digital records of their income and expenses
- Submit quarterly summaries to HMRC via approved software
- File a final end-of-year submission instead of the traditional Self Assessment tax return
This change moves tax compliance from an annual process to a real-time, digital-first approach.
Who is Affected by MTD ITSA?
Phase 1: From 6 April 2026
You must comply with MTD ITSA if:
- You are self-employed (sole trader), or
- A landlord (with UK property income),
- AND your total gross income (excluding dividends or savings income) is more than £50,000 per year.
Phase 2: From 6 April 2027
The threshold lowers to £30,000. This means many smaller businesses and landlords will be brought into the system a year later.
Not Affected (For Now)
- People earning less than £30,000 per year
- Directors with income solely from dividends or PAYE salary
- Partnerships and limited companies (separate rollout planned)
Who Needs to Join MTD ITSA and When?
| Start Date | Who Must Comply | Income Threshold |
|---|---|---|
| April 2026 | Sole traders & landlords | Over £50,000 |
| April 2027 | Sole traders & landlords | £30,000 to £50,000 |
| TBC | General partnerships | TBC |
| TBC | Companies under Corporation Tax | Later phase (MTD for CT) |
What Does MTD ITSA Involve?
1. Digital Record-Keeping
You must use MTD-compatible software to maintain digital records of all business and/or rental income and expenses. Excel is not sufficient on its own unless used with a bridging tool.
2. Quarterly Submissions
Every 3 months, you must send a summary of income and expenses to HMRC. These do not include tax calculations but must reflect your digital records.
✅ 4 quarterly updates per year (one per tax quarter)
3. End-of-Year Final Declaration
This replaces the Self Assessment tax return. You confirm your total taxable income, claim reliefs, and declare any other personal income not already reported.
✅ One final declaration due by 31 January following the tax year
Example: A Landlord with £60,000 Rental Income
- Quarterly updates via MTD software: April, July, October, January
- Final declaration filed by 31 January the following year
- No paper tax return needed
- Must keep digital receipts and expense records
Why Is This Happening?
According to HMRC, the goal is to:
- Improve tax accuracy
- Reduce errors and late filings
- Provide more timely and accurate tax payments
- Help taxpayers budget more effectively throughout the year
But in reality, it also means more reporting and more admin — which is why Merranti is here to make it easier.
How Merranti Will Help You Stay Compliant
✔️ Introducing Our New MTD ITSA System
We’re launching a simple, low-cost digital solution tailored for sole traders and landlords. Whether you want to manage updates yourself or prefer hands-off support — we have an option for you.
Our Packages (Coming Soon):
| Package | Features | Ideal For |
|---|---|---|
| DIY | MTD software + guidance | Tech-savvy who want to file themselves |
| Assisted | Quarterly check-ins + support | Clients who need some help but want to stay hands-on |
| Fully Managed | We handle it all | Busy clients or those who prefer to delegate everything |
Why Choose Merranti?
✅ We’re MTD-ready and HMRC-compliant
✅ We offer flat monthly fees with no surprises
✅ Our team includes dedicated tax specialists for sole traders and landlords
✅ Already use Xero, QuickBooks or FreeAgent? We integrate seamlessly.
The Risks of Doing Nothing
Delaying your MTD ITSA preparation could lead to:
- Penalties for missed submissions or late payments
- Stress and rushed filing at year-end
- Non-compliance with HMRC’s legal requirements
- Loss of tax reliefs due to reporting errors
Don’t wait until the last minute — we can help you prepare today.
What Should You Do Now?
✅ Step 1: Check if you’re affected
Add up your total business and/or rental income (before expenses). If it exceeds £50,000, you’ll need to comply from April 2026.
✅ Step 2: Keep better records
Start digitising your receipts and get used to cloud-based accounting if you’re still using paper.
✅ Step 3: Contact Merranti
We’ll help you:
- Confirm if and when you’re affected
- Choose the right package
- Set up your software and systems early
- Train you (if needed)
- Provide full support through your first year under MTD
📩 Contact us now for a free review →
Frequently Asked Questions
What counts towards the £50,000 income threshold?
It includes self-employment income and/or rental income before expenses, but excludes dividends, savings interest, or PAYE salary.
Do I still file a Self Assessment return?
No — your final declaration replaces the Self Assessment tax return, but only once you are fully within MTD ITSA.
Can I keep using spreadsheets?
Only if linked to approved bridging software — but we recommend cloud tools for full compliance and ease.
Let’s Get You Ready for April 2026
Making Tax Digital for Income Tax is not optional — but with Merranti on your side, it doesn’t need to be stressful or expensive.
💬 Contact us now to discuss your options, book a demo, or receive our free MTD readiness guide.
