Self-employed businesspeople should start preparing now for legislation set to radically revamp the reporting of income tax to HMRC, Cumbrian accountants have urged.
The government confirmed its plans to roll out its Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) initiative which will require sole traders and landlords who earn over £50,000 per year to keep digital records and submit quarterly updates to HMRC using compatible software.
MTD for ITSA changes will become legislation from April 2026 and follows the implementation of MTD for VAT.
Stuart Farrer, a Partner at Cumbrian-based Saint & Co Chartered Accountants is recommending businesses impacted by the changes to start preparing now to ensure everything is in place well in advance of the start date.
He said: “The MTD for ITSA legislation will impact millions of sole traders and landlords across the country, and thousands across Cumbria alone.
“So it is really important that qualifying businesses are aware of the impending legislation, and are also making steps as early as possible to make sure they are ready for the changes.
“There is some excellent software out there, such as Xero, which allows people to get in-depth insights into their finances and giving them access to online invoicing, job tracking and receipt capturing to make these essential tasks quick and simple to manage.
“The days of keeping non-digitised records are coming to an end and only HMRC-recognised software will be eligible, so if sole traders and landlords are not already using these systems, it is advisable to get working on them as soon as possible to iron out any issues ahead of the changes expected for April 2026.”
The threshold of £50,000 per annum will impact only a certain percentage of self-employed people, but wider changes for lower earning businesses will come in from 2027.
Those with an income over £30,000 will need to use MTD or ITSA software from April 2027, with those earning over £20,000 needing to implement the changes from 2028.
Stuart said: “The MTD changes are being phased out across the board over the next three years and the majority of sole traders and landlords will hit the requirements by 2028.
“My advice would be for people to get to grips with the software at the earliest stage possible as the legislation is coming in at some point and the more knowledgeable they are with the systems, the easier their lives will be when it comes to reporting income tax.”
Saint & Co provides a wide range of financial services across tax, auditing, VAT and payroll, and has Xero champions across the business.
The company, which celebrated its 140th anniversary in 2024, has nine offices across Cumbria and Dumfries & Galloway. The team can be contacted at 01228 534371 or advice@saint.co.uk.
