MTD for Self-Employed: What You Need to Know for 2025 Year-End

Introduction

The UK government is continuing its phased rollout of Making Tax Digital for ITSA, transforming how businesses and self-employed individuals report their taxes. The next major changes are set for April 2026 and April 2027, impacting self-employed taxpayers and landlords. With the 2025 year-end tax assessment approaching, it’s crucial to understand these changes and prepare accordingly.

Key Making Tax Digital for ITSA Changes in 2026 & 2027

1. MTD for Income Tax Self-Assessment (ITSA) Rollout

April 2026: Making Tax Digital for ITSA Begins

• Self-employed individuals and landlords earning over £50,000 per year must comply with MTD for ITSA.
• Quarterly digital updates will replace the annual Self Assessment tax return.
• Records must be kept using MTD-compatible software.

April 2027: Expansion of Making Tax Digital for ITSA

• The threshold lowers to £30,000 per year, meaning more self-employed individuals will be required to comply.
• The government is considering extending Making Tax Digital for ITSA to those earning below £30,000, but no final decision has been made yet.

For more details, visit HMRC’s official MTD page.

Current Process for Filing Self-Employed Tax Returns

Under the current system, self-employed individuals must:

• Keep detailed records of all business income and expenses.
• Complete a Self Assessment tax return via HMRC’s online portal or submit a paper return.
• Report earnings and allowable expenses to determine taxable income.
• Submit returns and pay tax annually by the following deadlines:
  • Paper tax return: 31 October following the tax year.
  • Online tax return: 31 January following the tax year.
  • Payment deadline: 31 January (or 31 July for second payments on account).

For current Self Assessment guidance, visit GOV.UK’s Self Assessment page.

What the Filing Process Will Look Like in 2026 and 2027

Under Making Tax Digital for ITSA, the process will be significantly different:

1. Digital Record-Keeping for MTD
   • Self-employed individuals must use HMRC-approved MTD-compatible software to maintain real-time digital records of income and expenses.
2. Quarterly Tax Submissions under MTD for ITSA
   • Instead of an annual tax return, self-employed individuals will need to submit quarterly updates to HMRC (every 3 months).
   • This provides a more frequent and up-to-date view of tax liabilities.
3. End-of-Period Statement (EOPS) for MTD
   • At the end of the tax year, an End-of-Period Statement (EOPS) must be submitted to ensure all information is complete and accurate.
4. Final Declaration for Making Tax Digital for ITSA
   • A Final Declaration (similar to a tax return) must be submitted confirming the total tax liability for the year.

Year-End 2025: Preparing for Self-Employed Tax Assessment

Before these changes take effect, self-employed taxpayers must still follow the existing Self Assessment rules for the 2025 tax year-end:

• Deadline for Online Submission: 31 January 2026.
• Paper Tax Return Deadline: 31 October 2025.
• Payment Deadline: 31 January 2026 (to avoid penalties and interest charges).

To prepare:

• Keep detailed financial records of income and expenses.
• Consider switching to MTD-compatible software ahead of the mandatory requirement.
• Seek professional tax advice to ensure compliance with both current and future tax regulations.

Benefits of Making Tax Digital for Self-Employed Individuals

• More Efficient Tax Management: Digital record-keeping reduces paperwork and errors.
• Improved Tax Planning: Regular updates provide better financial visibility throughout the year.
• Faster & More Accurate Reporting: Using MTD-compatible software ensures accurate tax submissions, minimizing risks of penalties.

How to Prepare for the Making Tax Digital for ITSA Transition

1. Check If You Qualify for MTD: Determine whether your income level meets the 2026 or 2027 MTD threshold.
2. Adopt Digital Accounting Software for MTD: Start using MTD-compliant software such as QuickBooks, Xero, or FreeAgent.
3. Register for MTD Early: If you qualify, register with HMRC to avoid last-minute compliance issues.
4. Seek Accountant Support for MTD Compliance: A tax professional can help navigate the transition smoothly.

The Role of Accountants in Making Tax Digital for ITSA Compliance

At Plan A Financials Ltd, we play a crucial role in helping self-employed individuals and small businesses transition to Making Tax Digital for ITSA smoothly. Our services include:

• Software Setup & Training for MTD: We assist in setting up and using MTD-compatible software such as Xero, QuickBooks, FreeAgent, and other UK-recognized platforms.
• Quarterly Tax Reporting Support: We help ensure your quarterly updates are accurate and submitted on time to HMRC.
• Real-Time Financial Insights for MTD Compliance: By maintaining digital records, we provide tax planning advice to optimize your tax position.
• End-of-Period Statement (EOPS) & Final Declaration Assistance: We handle the complex tax calculations and ensure compliance with MTD regulations.
• Ongoing MTD Compliance Support: We stay updated on HMRC guidelines to keep you compliant and penalty-free.

If you’re self-employed and need expert guidance on Making Tax Digital for ITSA compliance, let Plan A Financials Ltd handle the transition for you!

Conclusion

The shift to Making Tax Digital for ITSA marks a significant change for self-employed individuals and landlords. With the MTD rollout in 2026 and 2027 and the 2025 year-end tax assessment approaching, proactive preparation is key. Start digitizing your records, explore MTD-compliant tools, and consult with a tax expert to stay compliant and avoid penalties.

Need Help with MTD Compliance?

At Plan A Financials Ltd, we specialize in helping self-employed individuals and small businesses navigate tax changes. Contact us today for expert MTD advice and support!

📞 Call us at: 01277 236 246
✉️ Email us at: info@plan-a.co.uk
🌐 Visit our website: https://www.plan-a.co.uk