What are the Making Tax Digital for Income Tax (MTD ITSA) turnover thresholds and start dates?

Full answer

MTD for Income Tax Self Assessment represents the most significant change to how self-employed people and landlords report their income to HMRC in decades, moving from one annual tax return towards ongoing digital record-keeping and more frequent updates throughout the year. **Why MTD ITSA is being introduced** The stated aim is to reduce the tax gap caused by errors in record-keeping and to give both taxpayers and HMRC better, more real-time visibility of tax position throughout the year, rather than relying on a once-a-year reconciliation that can surface errors long after they were made. **Phased thresholds** Rather than applying to everyone at once, MTD ITSA has been phased in based on qualifying income (broadly, gross self-employment and/or property income combined, before expenses), starting with the highest earners first -- the higher initial threshold catching self-employed people and landlords with combined qualifying income above a higher figure first, before a progressively lower threshold brings in more taxpayers in later phases. Because the exact thresholds and start dates have been subject to government announcements and delays over several years, taxpayers should check HMRC's current, confirmed timetable for their specific qualifying income level rather than relying on an earlier proposed date. **What "qualifying income" means** Qualifying income for MTD ITSA purposes is based on the combined GROSS turnover from self-employment and property income (before deducting expenses), not net profit -- so someone with high turnover but modest profit margins could still be brought into MTD ITSA earlier than their actual taxable profit might suggest, since the threshold looks at turnover, not profit. **What compliant taxpayers must do differently** Once required to join MTD ITSA, a taxpayer must keep digital records of their income and expenses (rather than paper records or basic spreadsheets not linked to compatible software) using HMRC-recognised MTD-compatible software, submit quarterly updates summarising income and expenses for each quarter, and submit a final "end of period statement" and personal tax return equivalent (a "final declaration") after the tax year ends, replacing the single traditional Self Assessment return submission. **Who is currently excluded** Taxpayers below the relevant qualifying income threshold, and certain other specified categories (such as some trustees, or those without a National Insurance number, or in specific limited digital exclusion circumstances such as genuine inability to use digital tools due to disability, age, remoteness of location, or religious grounds), are not required to join MTD ITSA, though they can often opt in voluntarily if they wish. **Worked example** A self-employed consultant with gross turnover of £55,000 (well above the qualifying thresholds that have applied in earlier MTD ITSA phases) is required to join MTD ITSA from their relevant start date, needing to use compatible software (such as cloud accounting software with MTD functionality) to record income and expenses digitally throughout the year, submit four quarterly updates to HMRC summarising their trading position, and then complete a final declaration after the tax year ends -- replacing what would previously have been a single Self Assessment return submitted by 31 January. **Practical tip** Even taxpayers not yet required to join MTD ITSA under the current phased timetable should consider moving to compatible digital record-keeping software sooner rather than later, since the threshold has historically been lowered over time to bring in more taxpayers, and switching software and habits well before a mandatory deadline avoids a rushed transition.

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