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Extension of MTD

December 4, 2024

Under Making Tax Digital for Income Tax Self Assessment (MTD for ITSA), sole traders and unincorporated landlords within its scope will be required to keep digital records of their trading and/or property income and provide quarterly updates to HMRC using MTD-compatible software. Its introduction is being phased in.

Phase 1 – April 2026 start date

From 6 April 2026, MTD for ITSA will apply to sole traders and unincorporated landlords whose combined taxable business and property income exceeds £50,000 a year. It is important to note that the trigger is the total from both sources. For example, a sole trader with business income of £40,000 who also has property income of £12,000 will need to comply with MTD for ITSA from 6 April 2026 regardless of the fact that separately neither business nor property income exceed £50,000.

Phase 2 – April 2027 start date

The MTD for ITSA mandation threshold is lowered to £30,000 from 6 April 2027. From that date, sole traders and unincorporated landlords with business and/or property income of more than £30,000 must comply with the requirements of MTD for ITSA.

Phase 3 – by the end of the current Parliament

At the time of the 2024 Autumn Budget, the Government announced that sole traders and unincorporated landlords with business and/or property income of more than £20,000 will be brought within the scope of MTD for ITSA by the end of the current Parliament. The precise date has yet to be announced – this will be done at a future fiscal event.

Plan ahead

It is important that sole traders and unincorporated landlords know their MTD start date and that they are ready to comply with the requirements of MTD for ITSA from that date. To do so, they will need to use MTD-compatible software. Details of software that ticks this box can be found on the Gov.uk website.

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