You’ll already be familiar with Making Tax Digital if your business is VAT-registered, but the next stage of the MTD rollout involves income tax self-assessment (MTD for ITSA) and it’s important to be prepared early to ensure compliance and to take advantage of the many benefits of using accounting software.
Get Compliant with our MTD Accountancy Packages
If you fall under the scope of Making Tax Digital for Income Tax, our MTD accountancy packages make compliance easy. Designed for sole traders and landlords, our packages provide everything you need to stay organised, compliant with MTD and manage your finances with confidence.
Whether you prefer to manage your own bookkeeping or want full support from a dedicated accountant, we offer flexible options to suit your needs.
- FreeAgent or Xero HMRC-approved accounting software included at no extra cost
- Self-assessment and MTD registration with HMRC
- Automated reminders and tax deadline alerts
- Quarterly updates and final declaration submissions
With real-time financial insights, tax estimates, and streamlined digital record-keeping, you’ll gain better visibility over your cash flow and avoid last-minute surprises. For those who want a more hands-off approach, our complete package also includes proactive advice, regular reviews, and expert support throughout the year.
The UK’s Most Trusted Accountancy Firm
What is Making Tax Digital (MTD)?
MTD is a key part of the Government’s wider Tax Administration Strategy with the aim of digitising the UK tax system to make HMRC one of the most digitally advanced tax administrations in the world.
MTD legislation mandates digital record-keeping and digital tax filing using HMRC-approved software in order to make the tax system more efficient, accurate and easier for both taxpayers and HMRC as well as closing the tax gap.
From an income tax perspective, the traditional self-assessment tax return process will be replaced, if there’s no income to consider other than MTD income, with taxpayers having to provide quarterly updates to HMRC and then file an End of Period Statement (EOPS) and a Final Declaration under MTD.
MTD is currently undergoing a phased rollout and it’s important that self-employed people understand their obligations both now and in the future and prepare early to ensure a smooth transition and to be compliant and avoid any penalties.
Making Tax Digital Timeline
- What’s to come HMRC will reveal the next phases of the MTD rollout in due course
- April 2028 MTD for Income Tax Self-Assessment will be mandatory for sole traders and landlords earning over £20,000
- April 2027 MTD for Income Tax Self-Assessment will be mandatory for sole traders and landlords earning over £30,000
- April 2026 MTD for Income Tax Self-Assessment will be mandatory for sole traders and landlords earning over £50,000
- April 2021 Digital links became mandatory
- April 2019 MTD for VAT mandatory for businesses with a taxable turnover over the VAT threshold (£85,000 at the time)
- July 2017 Rollout revised due to concerns from professional bodies and businesses
- March 2015 MTD first introduced in the Spring Budget
Who's Affected by Making Tax Digital?
Making Tax Digital for VAT has been mandatory since April 2022. This means that all VAT registered businesses must use HMRC-approved software to record their transactions and to calculate and submit their VAT returns, so if you’re not VAT registered you’ll likely be unfamiliar with MTD.
As the phased rollout continues, HMRC are writing to affected taxpayers, based on their 2023/24 self-assessment filings, to make them aware that they must comply with MTD for ITSA from April 2026. If you haven’t received a letter yet you may get one soon, depending on your income, but it’s important to understand your obligations.
The ball is rolling with MTD for ITSA so if you have received this letter or have any queries about compliance, we can help. Get in touch today to speak to an accountant if you’d like to learn more and to discover how FreeAgent or Xero accounting software, which we provide free of charge to all our clients, can be transformational for your business beyond just ensuring MTD compliance.
From April 2026, some sole traders and landlords will have to comply with the rules as well as Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) is introduced. The rollout is phased meaning that implementation will be staggered depending on turnover.
- From April 2026: MTD for ITSA becomes mandatory for sole traders and landlords with a turnover exceeding £50,000 in their 2023/24 tax return
- Effective from April 2027: MTD for ITSA becomes mandatory for sole traders and landlords with a turnover exceeding £30,000
- Effective from April 2028: MTD for ITSA becomes mandatory for sole traders and landlords with a turnover exceeding £20,000
MTD for ITSA with Gorilla in Partnership with FreeAgent and Xero
We are huge advocates of the benefits of technology which is why we are Platinum Partners with both FreeAgent and Xero. Multiple award-winning FreeAgent and Xero are fully MTD-compliant and provided free of charge to all our clients inclusive in all our accountancy packages saving them £100s a year.
Just like with MTD for VAT, it pays to get ahead and transition to accounting software early so you’re fluent with keeping ITSA records digitally before it becomes mandatory. As well as ensuring you are fully MTD-compliant, there are significant benefits of using accounting software that can make a real business difference.
FreeAgent and Xero have powerful inbuilt functionality, features and automation that streamline and simplify previously laborious and repetitive accounting and admin tasks. This helps improve accuracy and will free up more of your time to focus on your day to day and growing your business with minimal accounting and admin distractions.
FreeAgent and Xero are cloud-based so you can access your accounts at any time on any device with an internet connection to get a comprehensive real-time overview of the financial position and health of your business thanks to the powerful inbuilt reporting.
- Tax returns are generated automatically while you work and electronically submitted to HMRC
- Upload receipts and manage your expenses on the go via an app to keep on top of your bookkeeping throughout the year
- Time tracking functionality enables you to log the time you spend on projects and tasks so you can bill your clients easily and accurately
- Create and send professional, personalised invoices and payment reminders and automatically chase unpaid invoices
- Payment gateway integration makes it easy for your clients to pay you quickly and securely online
- Automated bank feeds upload transactions from your bank account each day so you can easily reconcile and categorise your bank transactions
Join Gorilla Accounting and MTD-compliant Accounting Software is included in our service
As a Gorilla Accounting client, you receive full inclusive access to industry-standard FreeAgent or Xero accounting software inclusive with all our accountancy packages. This ensures you are future-proofed in respect of your MTD obligations. This means that from April 2026 we will be able to file the quarterly updates and EOP statement needed for MTD-compliance and a self-assessment tax return included in our monthly fee.Â
Accounting software offers significant and wide-ranging benefits beyond MTD that can make a transformational difference for your business.
In addition, you’ll receive unlimited support and advice from your own dedicated accountant who will expertly manage all your business and personal accounting needs. They will be on hand to provide unlimited support and advice with a guaranteed same working day response to your queries.
FULL FREEAGENT OR XERO ACCESS
Full access to industry-standard MTD-compliant FreeAgent or Xero cloud accounting software is included for all our clients.
TRANSPARENT, FIXED-FEE PRICING
Our accounting packages are all-inclusive with fixed-fees so there are no nasty surprises.
EXPERT ACCOUNTANTS
All your business and personal accounting needs expertly managed by your own dedicated accountant
UNLIMITED SUPPORT & ADVICE
Unlimited expert support and advice with a guaranteed same working day response to your queries.
The UK's Most Trusted Accountancy Firm
The Benefits of Making Tax Digital
As contractor accountants, we understand that Making Tax Digital feels like a big change and that self-employed people may be wary of MTD for ITSA. However, we also know there are significant benefits to the introduction of this legislation and using MTD-compatible accounting software.
EFFICIENT
Because you’re recording everything digitally instead of on paper or in Excel spreadsheets, the tax system becomes more effective and efficient for both you and HMRC
ORGANISED
It will be easier to submit all your documents correctly and on time since they’re stored in the same place; this will also help you remain organised as well as having a digital backup
REAL TIME
MTD helps to reduce and eliminate errors, mistakes and information being missed. Tax updates will happen in ‘real time’, allowing you to always be aware of where you stand tax-wise which will further help to prevent errors, overdue tax and reduce the chance of an investigation and fines or penalties from HMRC
TIME SAVING
MTD has been designed to save you time since you will have less documentation to fill out, mainly because HMRC will stay up to date with information digitally
HMRC LINK
Another important factor of Making Tax Digital is that you can interact with HMRC at a time that suits you. Your digital account will be linked to the Government’s system allowing direct communication between HMRC and your business
CLEAR OVERVIEW
Having a real-time overview of your tax position and the overall financial position of your business allows you to make key business decisions quickly, budget for potential tax liabilities and communicate quickly with HMRC
Making Tax Digital reduces paperwork and streamlines the recording process. Switching to MTD-compatible accounting software is also a big timesaver as it calculates your tax liability in the background while you work and it offers comprehensive automation that significantly reduces the time you need to spend on bookkeeping and admin tasks.
What Are the Penalties for Non-Compliance with Making Tax Digital?
The MTD for VAT penalty system was revised in January 2023 and the same penalty system will also apply to MTD for ITSA when it’s introduced. It’s important to be prepared and ensure compliance and avoid any fines and penalties.
The MTD penalty system is points based with 1 point usually being applied for a late submission. Once you accumulate a certain number of points, a £200 penalty will be applied.
The points threshold to trigger a penalty is dependent on how frequently you have to make a submission to HMRC. Accruing 2 penalty points for annual submissions, 4 for quarterly submissions or 5 for monthly submissions will all result in a £200 fine. There can be further fines if, during the surcharge period, you miss payment deadlines.
Penalty points will expire after a 2 year period starting from the month after the penalty point was issued. There are separate points totals for each submission obligation you have, so it will be possible to receive penalties for MTD for ITSA and Corporation Tax, when they are introduced, in addition to MTD for VAT.
If you don’t use functional and compatible software to file your returns you could receive a penalty of £400 for every return you file.
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