Making Tax Digital for Income Tax: How to Prepare and How Merranti Can Help

Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is one of the most significant changes to the UK tax system in recent years. For sole traders and landlords, it marks a permanent shift away from annual reporting and towards continuous digital compliance.

Although the start date has been delayed multiple times, MTD ITSA is no longer a distant concept. It is now a confirmed requirement with clear implementation dates, and HMRC has made it clear that further delays are unlikely.

For many taxpayers, particularly those who have historically managed their affairs with spreadsheets, paper records, or once-a-year bookkeeping, MTD ITSA will require a fundamental change in habits, systems, and expectations.

This article explains what MTD ITSA is, who it applies to, what will change in practice, how you can prepare, and how Merranti Accounting can support you at every stage of the transition.

What Is Making Tax Digital for Income Tax (MTD ITSA)?

MTD ITSA is part of HMRC’s wider Making Tax Digital programme, which aims to modernise the UK tax system by moving away from manual reporting and towards real-time digital record keeping.

Under MTD ITSA, affected taxpayers will be required to:

Keep digital records of income and allowable expenses
Use MTD-compatible software
Submit quarterly updates to HMRC
Submit an End of Period Statement (EOPS) for each income source
Submit a Final Declaration confirming total taxable income, reliefs, and allowances

This replaces the traditional process of preparing a single annual Self Assessment return based on records that may not have been reviewed for many months.

Who Will Need to Comply With MTD ITSA?

MTD ITSA will apply to sole traders and landlords, based on their level of gross income.

Confirmed implementation timetable:

From April 2026
Individuals with gross qualifying income over £50,000
From April 2027
Individuals with gross qualifying income over £30,000

Gross qualifying income includes:

Self-employed turnover (before expenses)
Rental income (before expenses)

If you have both self-employed income and rental income, the totals are combined when assessing whether you meet the threshold.

MTD ITSA will not apply to:

Limited companies
Individuals with income taxed fully under PAYE (unless they also have qualifying self-employed or rental income)

General partnerships are expected to be brought into the regime at a later stage.

What Will Change in Practice?

While the amount of tax you pay will still be calculated annually, how and when information is provided to HMRC will change significantly.

Under the current system:

Records may be paper-based or spreadsheet-based
Bookkeeping may only be updated once a year
HMRC receives one tax return per year

Under MTD ITSA:

Records must be kept digitally and continuously
Updates must be submitted every quarter
HMRC gains visibility of your income and expenses throughout the year
Errors are more likely to be identified earlier

Quarterly submissions are not tax bills, but they do form part of your compliance record. Accuracy and consistency will matter more than ever.

Understanding the New Reporting Obligations

Quarterly Updates

You will need to submit four quarterly updates each tax year, covering:

6 April to 5 July
6 July to 5 October
6 October to 5 January
6 January to 5 April

Each update must be submitted within one month of the quarter end.

These updates summarise income and expenses but do not include:

Capital allowances
Accounting adjustments
Personal reliefs

End of Period Statement (EOPS)

After the tax year ends, you must submit an EOPS for each income source (for example, one for self-employment and one for property income).

This is where:

Adjustments are made
Reliefs and allowances are applied
Final business profits are confirmed

Final Declaration

The Final Declaration replaces the current Self Assessment tax return. It confirms:

All sources of income
Reliefs such as pension contributions and Gift Aid
The final tax position for the year

The deadline remains 31 January following the end of the tax year.

Why MTD ITSA Feels More Demanding

While HMRC describes MTD ITSA as a simplification, many taxpayers will experience it as more demanding because:

There are more deadlines, not fewer
Bookkeeping must be kept up to date throughout the year
Software becomes mandatory
HMRC scrutiny becomes more frequent

For those used to annual reporting, this represents a cultural shift rather than just a technical one.

How You Can Prepare Now

Even if MTD ITSA does not apply to you immediately, early preparation will make the transition far smoother.

1. Confirm Whether and When MTD ITSA Will Apply to You

The first step is understanding:

Your current gross income
Whether it is likely to increase
Whether multiple income streams apply

Many people assume they are below the threshold, only to discover later that combined income pushes them over.

2. Move to Digital Record Keeping

If you are still relying on:

Paper records
Bank statements only
Annual spreadsheets

You will need to move towards digital systems that can support quarterly reporting.

3. Get Used to Regular Bookkeeping

MTD ITSA effectively removes the option to leave everything until January.

Developing a habit of:

Monthly or quarterly bookkeeping
Regular bank reconciliations
Prompt expense categorisation

will significantly reduce stress and errors later.

4. Choose Software Carefully

Not all MTD-compatible software is suitable for every taxpayer. The right choice depends on:

Type of income
Volume of transactions
VAT registration
Confidence with technology

Choosing the wrong software can create more work, not less.

How Merranti Accounting Can Help

MTD ITSA is not just about submitting numbers to HMRC. It is about designing a compliant, sustainable process that works for you.

MTD ITSA Readiness Reviews

We help clients understand:

Whether MTD ITSA applies
When it applies
What practical changes are required

This avoids last-minute surprises and rushed decisions.

Software Selection and Setup

Merranti Accounting supports clients with:

Selecting appropriate MTD-compatible software
Setting up digital records correctly
Ensuring data flows meet HMRC’s digital link requirements

This prevents common errors that cause problems later.

Ongoing Bookkeeping and Quarterly Reporting

For clients who prefer not to manage quarterly submissions themselves, we can:

Maintain bookkeeping records
Prepare and submit quarterly updates
Review figures for accuracy before submission

This allows you to remain compliant without the administrative burden.

Year-End Compliance and Tax Planning

We ensure that:

End of Period Statements are prepared correctly
Final Declarations are accurate
Tax liabilities are identified early

This avoids unexpected bills and supports better cash flow planning.

HMRC Support and Ongoing Advice

With increased reporting comes increased interaction with HMRC. Merranti Accounting can:

Act as your agent
Deal with HMRC queries
Correct errors efficiently
Provide ongoing guidance as rules evolve

Why Acting Early Makes a Difference

Clients who prepare early benefit from:

More time to adjust processes gradually
Better software choices
Reduced risk of missed deadlines
Lower long-term compliance costs

Those who wait often face:

Stressful onboarding
Rushed decisions
Higher risk of penalties
Ongoing compliance issues

Call to Action: Get Ready for MTD ITSA With Merranti Accounting

MTD ITSA is a permanent change to how tax compliance works for sole traders and landlords. Ignoring it or leaving preparation until the last minute will only make the transition harder.

Merranti Accounting helps clients move through MTD ITSA with clarity, confidence, and control — whether you want full support or guidance while keeping control in-house.

If you would like:

An MTD ITSA readiness review
Advice on whether the rules apply to you
Help choosing or setting up software
Ongoing quarterly reporting support

Get in touch with Merranti Accounting today to discuss how we can help you prepare for Making Tax Digital for Income Tax and ensure you remain compliant as the rules come into force.

Early action now can save time, cost, and stress later.

How to Prepare for MTD ITSA and How Merranti Can Help