MTD for Income Tax: What Every Cornwall Sole Trader Needs to Know

As a sole trader in Cornwall, you're used to the ups and downs of running your own business. From navigating the busy tourist season to the quiet winter months, managing your finances is a year-round challenge. But there's a big change on the horizon that you need to be aware of: Making Tax Digital for Income Tax Self Assessment (MTD for ITSA).

What is MTD for ITSA?

Making Tax Digital is HMRC's plan to modernise the tax system by making it easier for businesses to get their tax right. MTD for ITSA is the next phase, following the successful rollout for VAT-registered businesses. It requires sole traders and landlords to keep digital records of their income and expenses and to submit updates to HMRC quarterly using compatible software.

The aim is to move away from the traditional, once-a-year tax return and bring the system closer to real-time. This can help you stay on top of your financial position throughout the year, reducing the stress of a last-minute scramble before the tax deadline.

When Does It Start?

The implementation of MTD for ITSA is being phased in based on your total business income.

• From April 2026: It will be mandatory for sole traders and landlords with a combined gross income from self-employment and/or property of over £50,000.

• From April 2027: The rules will extend to those with a combined gross income of over £30,000.

HMRC has not yet confirmed when it will apply to those with an income below £30,000, but it's wise to start preparing now.

What Do You Need to Do?

To be compliant with MTD for ITSA, you'll need to make a few key changes to how you manage your bookkeeping:

1. Keep Digital Records: You can no longer rely on a shoebox of paper receipts or an outdated spreadsheet. All of your income and expenses must be recorded digitally.

2. Use Compatible Software: You must use HMRC-approved software to record your transactions and submit your returns. Many popular accounting software providers, such as Xero, are already MTD-compliant.

3. Submit Quarterly Updates: Every three months, you'll need to send a summary of your income and expenses to HMRC. The deadlines for these are fixed: 5 August, 5 November, 5 February, and 5 May.

4. Finalise Your Annual Return: At the end of the tax year, you'll still have a final declaration to submit, but a lot of the work will have been done throughout the year.

How Tidal Bookkeeping Cornwall Can Help

The shift to MTD for ITSA can feel daunting, but you don't have to go it alone. As a local bookkeeper based in Redruth, we at Tidal Bookkeeping Cornwall are already helping businesses across the county prepare for this change.

 The information featured in this article is for guidance only, no liability is accepted for the opinions it contains