HMRC Letter: Your Guide to Making Tax Digital for Income Tax

That brown envelope landing on your doormat from HMRC can sometimes trigger a moment of apprehension. If it contained information about Making Tax Digital for Income Tax (MTD for ITSA), you’re likely wondering what it means for you and your business. Here at Worthwhile Accountancy, we’re here to help you navigate these changes with confidence.

So, you’ve received a letter about Making Tax Digital for Income Tax – what now?

Firstly, don’t panic! This letter is likely an initial communication from HMRC to let you know about the upcoming changes and your potential obligations under MTD for ITSA. It’s a prompt to start understanding what’s involved and how it will affect your record-keeping and tax reporting.

What is Making Tax Digital for Income Tax?

In a nutshell, MTD for ITSA is a government initiative requiring self-employed individuals and landlords with a total gross income from self-employment and property over £50,000 per year to:

• Keep digital records of their business income and expenses.
• Use compatible software to submit quarterly updates of their income and expenses to HMRC.
• Submit a final declaration at the end of the tax year.

This marks a significant shift from the traditional method of submitting a single self-assessment tax return annually. The aim is to modernise the tax system, reduce errors, and provide HMRC with more regular insights into taxpayers’ income.

Who does Making Tax Digital for Income Tax affect?

The initial phase of MTD for ITSA, coming into effect from 6th April 2026, will primarily affect:

• Sole traders: Individuals who are self-employed and run their business as individuals.
• Landlords: Individuals who receive income from letting UK property.

It’s crucial to note that partnerships will be required to comply from a later date. If you operate your business as a limited company, you are currently outside the scope of MTD for ITSA. However, limited companies are already subject to Making Tax Digital for VAT if they are VAT-registered and above the threshold. Our Making Tax Digital for VAT services can ensure your limited company stays compliant.

Understanding which category your business falls into is the first step. If you’re unsure about your business structure or how MTD for ITSA applies to you, our team at Worthwhile Accountancy can provide clear and tailored advice. We work with a wide range of businesses, from sole traders in the retail sector to landlords managing property portfolios. Our expertise across various business sectors means we understand the unique challenges you face.

Why the change?

HMRC believes that digital record-keeping and more frequent updates will lead to fewer errors in tax returns and a more efficient tax system overall. For businesses, it can offer a more real-time view of their financial performance throughout the year, potentially aiding in better financial management.

Navigating Making Tax Digital for Income Tax with Worthwhile Accountancy

The prospect of new digital processes might seem daunting, but you don’t have to face it alone. Worthwhile Accountancy is here to guide you through every step of making tax digital for income tax. We can help you:

• Understand your obligations: We’ll clarify exactly how MTD for ITSA applies to your specific business.
• Choose the right software: There are various MTD-compatible software packages available, and we can help you select one that suits your needs and budget.
• Set up digital record-keeping: We’ll provide guidance and support in establishing efficient digital record-keeping processes.
• Submit quarterly updates: We can manage your quarterly submissions to HMRC, ensuring accuracy and timeliness.
• Prepare and submit your final declaration: We’ll handle your end-of-year obligations, giving you peace of mind.
• Provide ongoing support and advice: We’re always here to answer your questions and address any concerns you may have.

Our comprehensive Self Assessment services are evolving to fully incorporate the requirements of MTD for ITSA, ensuring a smooth transition for our clients.

Don’t wait until the last minute!

Receiving that letter from HMRC is your cue to start preparing for making tax digital for income tax. Contact Worthwhile Accountancy today for a consultation. We can help you understand your obligations, choose the right software, and ensure a seamless transition to this new digital way of managing your income tax. Let us take the stress out of MTD for ITSA, so you can focus on what you do best – running your business