Who needs to use MTD ITSA software in the UK and when?

The change is being introduced gradually: From April 2026 for those with annual income over £50,000, and from April 2027 for those with income between £30,000 and £50,000.

What does the MTD ITSA software do?

The software stores digital records of income and expenses, calculates the required quarterly updates, and sends these updates directly to HMRC without manual data entry. Examples include QuickBooks, Xero, and FreeAgent.

Why is a qualified accountant still needed for MTD ITSA?

While MTD software handles record-keeping, a qualified accountant ensures compliance, verifies correct claimable expenses, handles complex year-end adjustments, and provides strategic tax advice to help save money and avoid penalties.

What is MTD ITSA software

Wojciech

Diploma in Professional Accounting
Diploma for Financial Advisers
Member of London Institute of Banking and Finance

MTD ITSA software is a specific type of accounting or bookkeeping tool approved by HMRC that allows self-employed people and landlords in the UK to keep digital records and send tax updates to HMRC every three months.

What is MTD ITSA?

MTD stands for Making Tax Digital, and ITSA stands for Income Tax Self Assessment. It is a major change being introduced by HMRC to modernise the tax system.

Instead of keeping paper receipts or filing one Self Assessment tax return once a year, MTD ITSA requires you to:

Keep digital records of your business or property income and expenses.
Send a summary of this data to HMRC every three months (called ‘quarterly updates’) directly from the approved software.
Submit a final summary at the end of the year to complete your tax return.

The aim is to make managing your tax easier and more accurate throughout the year, rather than facing a massive scramble every January.

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Who Needs to Use the Software and When?

The change is being introduced gradually:

From April 2026: If your combined annual income from self-employment and/or property is over £50,000.
From April 2027: If your combined annual income is between £30,000 and £50,000.

If your income is below the current threshold, you will continue to use the current Self Assessment system for now.

What Does the Software Do?

The MTD ITSA software acts as the required link between your records and HMRC. It must be able to:

Store your income and expenses digitally.
Calculate the quarterly updates needed by HMRC.
Send these updates directly to HMRC without you having to manually re-enter the figures online.

Popular examples of MTD-compatible software include QuickBooks, Xero, and FreeAgent, as well as specialised ‘bridging software’ that can link a spreadsheet to HMRC.

Why You Still Need a Qualified Accountant

While MTD software is designed to make record-keeping easier, it doesn’t replace the expert knowledge of a qualified accountant.

An accountant will ensure you remain compliant and pay the correct amount of tax. They can:

Set up the software correctly for your specific business needs.
Check your quarterly submissions to make sure you’re claiming all the correct allowable expenses and capital allowances.
Handle the complex year-end adjustments and the final tax declaration (which still replaces your old Self Assessment form).
Provide strategic tax advice that the software simply cannot, potentially saving you a substantial amount of money and helping you avoid future penalties.

The shift to MTD ITSA is a legal requirement, and ensuring you meet all the submission deadlines and use the right figures is vital. For complete peace of mind, getting advice from a qualified tax professional is always the most secure way to handle these new rules.

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