How to Stay Compliant with HMRC’s Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA)

As a small business owner, staying compliant with HMRC’s Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) is crucial. From April 2026, self-employed individuals and landlords earning over £50,000 must use MTD-compatible software to keep digital records and submit tax returns. From April 2027, this requirement will extend to those earning over £30,000. Here’s your simple guide to choosing the best MTD software for your business.

1. Understand Your Business Needs Before Choosing MTD Software

When selecting MTD-compatible software, it’s essential to assess your business structure and financial management needs. Are you a sole trader or landlord? You’ll need a solution that simplifies digital record-keeping, tracks income and expenses, and integrates with HMRC’s MTD system seamlessly.

2. Key Features to Look for in MTD for ITSA Software

When evaluating your options, keep these key features in mind:

• HMRC Compatibility: Ensure the software is recognised by HMRC for MTD for ITSA compliance.
• Ease of Use: Look for user-friendly interfaces that make tax filing stress-free and efficient.
• Automation: Automated features like bank feeds and categorisation save you time and reduce errors.
• Integration: If you’re already using other financial tools, look for software that integrates easily with them.
• Support & Training: Good customer support and helpful tutorials will ensure you make the most of your software.

3. Top MTD for ITSA Software for Small Businesses in the UK

Here are some of the best MTD-compatible software options for small businesses:

• QuickBooks: A great choice for freelancers and small businesses, offering automation and HMRC MTD compliance.
• Xero: Ideal for growing businesses, with real-time financial tracking and MTD-ready features.
• FreeAgent: Simple, HMRC-approved software perfect for landlords and sole traders.
• Sage Accounting: A reliable, UK-based solution with strong MTD support and comprehensive features.

4. Who Needs to Comply with MTD for ITSA?

• From April 2026: Self-employed individuals and landlords earning over £50,000 must comply with MTD for ITSA.
• From April 2027: The threshold lowers to £30,000, meaning more small business owners and landlords will need to switch to digital tax filing.
• Partnerships: Currently exempt but may be included in future MTD updates.
• Voluntary Participation: Any sole trader or landlord can sign up early to familiarise themselves with the system before the deadlines.

5. Local and National Support for Small Businesses

If you’re unsure which software to choose or need help navigating MTD compliance, VAccounts is here for you. With our expert guidance, we’ll ensure a smooth transition to MTD for ITSA while keeping your focus on growing your business.

6. Get Ahead of the MTD for ITSA Deadline: Take Action Now

Don’t leave it to the last minute! Start preparing for MTD for ITSA today. Choose software that fits your business needs, set up your digital records, and be ready for the April 2026 deadline.

For more tailored advice on MTD for ITSA across the UK, get in touch with VAccounts today.