You may find a brown letter from HM Revenue & Customs (HMRC) dropping onto your doormat soon, with details of the soon-to-be-mandatory MTD for ITSA.

But what is ‘MTD for ITSA’ and why do you need to know about it?

Making Tax Digital for Income Tax & Self Assessment (or MTD for ITSA) is part of HMRC’s ongoing initiative to convert the UK tax return process over to a digital system.

If you’re a sole trader or landlord, you’ll soon need to:

• Keep digital records of all your income and expenses.
• Use MTD-compatible software for your bookkeeping and accounting.
• Submit regular quarterly digital reports to HMRC.
• Send a full digital tax return at the end of the tax year.

Landlords and sole traders who fall into the following categories will soon find it’s mandatory to use the MTD for ITSA system.

• from April 2026, for those with qualifying income over £50,000.
• from April 2027, for those with qualifying income over £30,000.

A brown envelope with your MTD ITSA reminder

From April 2025, HMRC will be starting a campaign to raise awareness of the looming deadline to become compliant with the MTD for ITSA rules.

This will be kickstarted with an official HMRC brown envelope being sent to sole traders and landlords with a total self-employment and/or property income of over £50,000.

You’ll receive a letter if your 2023 to 2024 self assessment tax return shows your total income (turnover, not profit) as being either over, or close, to £50,000.

An official letter from HMRC can sometimes be cause for concern. But there’s no need to worry unduly about MTD for ITSA. The mandatory deadline for compliance is still a year away, so there’s plenty of time to update your systems and get yourself compliant.

Please contact Jake Mackenzie on 01227 277667 or email j.mackenzie@mphaccountants.co.uk and he will explain the implications of MTD for ITSA, the need for digital records and how to get compatible cloud accounting software up and running.