The UK government’s Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) is set to change the way many self-employed individuals and landlords report their income tax. If you fall within the scope of these changes, now is the time to prepare. In this blog, we’ll outline who must comply, what it means for you, and how we can support you with Xero to make the transition smooth and stress-free.
Who Will Be Affected?
From April 6, 2026, MTD for ITSA will apply to: self-employed individuals and landlords with a total gross income of £50,000 or more.
From April 2027, the threshold will drop to £30,000, bringing more individuals into the system.
From April 2028, the threshold will drop to £20,000, bringing more individuals into the system.
The figures from individuals’ 2024/25 tax returns will be used as the basis for determining whether they qualify for MTD.
Partnerships and businesses below the threshold are not currently required to comply, but further government announcements may extend the requirements.
What Does This Mean for You?
If you meet the income criteria, here’s what you need to do under MTD for ITSA:
- Keep digital records of income and expenses using MTD-compatible software.
- Submit quarterly updates to HMRC in addition to the existing Self-Assessment tax return.
- Provide an End-of-Period Statement (EOPS) and a Final Declaration annually to confirm your total tax liability.
MTD does not replace the current tax return system but adds new digital reporting requirements on top of it. This means more frequent reporting but also greater visibility into your tax position throughout the year.
How We Can Help with Xero
We know that transitioning to MTD can seem daunting, but with the right tools and support, it can actually simplify your accounting process.
Why Xero?
- MTD-compliant software approved by HMRC.
- Automatic data capture from bank feeds to reduce manual input.
- Easy expense tracking via the mobile app.
- Quarterly reporting features to help meet HMRC’s requirements effortlessly.
- Integration with other financial tools to streamline your business finances.
At Greystone Advisory, we can help you:
✅ Set up Xero and ensure it’s fully compliant with MTD.
✅ Provide training so you can confidently manage digital record-keeping.
✅ Offer ongoing support to help you meet deadlines with ease.
Action Plan & Timeline
Here’s how you can prepare for MTD for ITSA:
Early 2025:
- Assess whether your income meets the £50,000 threshold based on your 2024/25 tax return.
- Choose an MTD-compatible accounting software (we recommend Xero).
- Start recording income and expenses digitally to get familiar with the system.
2025 to Early 2026:
- Ensure your software is fully set up and linked with HMRC.
- Practice submitting quarterly reports using Xero.
- Get professional advice to optimise your tax efficiency under the new system.
April 6, 2026:
- MTD for ITSA officially starts for those earning £50,000+.
- Submit your first quarterly update by July 2026.
April 2027:
- The threshold reduces to £30,000, if you now qualify, start preparing in advance.
Contact us today to discuss how we can help you transition to MTD seamlessly and make your tax reporting effortless.
