MTD for ITSA: The Biggest Change to Tax in a Generation
Written by Nidhi Yadav
If you’ve been following the Pennyhills journey, you’ll know we are all about keeping it simple. Whether I’m streamlining operations here at the firm or managing the chaos of a 7-year-old who can recite every Pokémon evolution in existence, I know that clarity is king.
But for many landlords and sole traders, a major “clarity check” is coming. From 6 April 2026, the way you report your income to HMRC is fundamentally changing. It’s called Making Tax Digital for Income Tax Self Assessment (MTD for ITSA), and it’s time to get your business “digital-ready.”
What Exactly is Changing?
The traditional “once-a-year” Self Assessment is being retired. HMRC is moving toward a real-time digital system designed to reduce errors and provide a clearer picture of tax liabilities throughout the year.
The Deadlines You Need to Know:
- April 2026: Mandatory for those with a qualifying gross income over £50,000.
- April 2027: The threshold drops to £30,000.
- April 2028: The threshold is expected to expand to those earning over £20,000.
The New Requirements:
- Digital Record Keeping: You must maintain your business records (income and expenses) digitally. Paper ledgers and manual spreadsheets are being phased out in favour of MTD-compatible software like Xero or QuickBooks.
- Quarterly Updates: Instead of one annual deadline, you’ll send a summary of your business data to HMRC every three months.
- Final Declaration: You will still complete a final declaration at the end of the tax year to pull everything together, but the data will already be sitting in your system.
Why “Wait and See” is a Risky Strategy
At Pennyhills, we live by the value of Lifelong Learning. We’ve seen that the most successful businesses are those that adapt before they are forced to.
- Transitioning to digital accounting isn’t just a compliance tick-box; it’s about Work-Life Balance. By automating your bookkeeping, you stop the “January scramble” that steals your weekends. Instead, you get:
- Real-time oversight: Know your profit and tax bill on the go.
- Better organization: No more lost receipts or forgotten expenses.
- Peace of mind: Knowing your records are 100% compliant and audit-ready.
We take huge inspiration from leaders like Rachel Harris (@accountant_she), who show that modern accountancy should support your lifestyle, not hinder it. We want you to spend less time on admin and more time doing what you love—whether that’s hitting the pavement for a morning run or heading to the park with the kids (and hopefully, our soon-to-arrive office puppy! 🐶).
Get Ahead of the Curve with Pennyhills ☕
The transition to MTD doesn’t have to be daunting. We are here to help you choose the right software, migrate your data, and train you on the new quarterly rhythm so it becomes second nature.
- Is your current process MTD-ready? Let’s find out. We are offering Digital Readiness Consultations for landlords and sole traders to ensure you are prepared well ahead of the April 2026 deadline.
Book your ‘MTD Discovery’ call with the Pennyhills team here! ✨
Need Help?
Visit www.pennyhills.com/contact-us or Click here to chat now and discover how we can partner with you on your journey. You deserve the expertise and dedication that Pennyhills® brings to the table. Let’s embark on this journey together.
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MTD for ITSA arrives in April 2026. Discover how digital record-keeping and quarterly reporting will affect UK landlords and sole traders.