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Making Tax Digital for Income Tax - Self Employed

Lorraine Keogh
  • Updated

Making Tax Digital

Making Tax Digital is a HMRC initiative to modernise how taxpayers submit their VAT and self assessment data.

Businesses must transition from paper record-keeping and manual submissions to a digital workflow. HMRC-recognised software is needed to comply with tax filing rules and simplify reporting.

Digital transformation aims to:

  • Reduce the likelihood of errors caused by manual submissions
  • Streamline the tax process for HMRC and taxpayers alike
  • Allow businesses to keep a more accurate and up-to-date record of their finances

MTD VAT has been a feature of BrightBooks and BrightAccountsProduction Bookkeeping since it was mandated by HMRC in April 2019 for businesses with taxable turnover above £85,000 and from April 2022  for all businesses.

MTD ITSA

Making Tax Digital Income Tax Self Assessment

Who will this affect and When?

MTD for ITSA applies to taxpayers with sole trade or property income above the HMRC threshold. The initiative is being introduced in phases, ensuring a smoother transition for affected individuals.

The phased rollout means:

  • From April 2026, taxpayers with an income over £50,000 must comply
  • From April 2027, those earning over £30,000 will be included
  • From April 2028, those earning over £20,000 will be included

Timeline

Since April 2025 MTD ITSA is in a public pilot phase, this means that taxpayers can begin to test the service voluntarily.

From April 2026 it will be mandatory (for the taxpayers of the effective threshold, see above)

What next?

  1. Create an agent services account with HRMC, if you don’t already have one
    Create an agent services account - GOV.UK
  2. Sign up your client(s) for MTD for Income Tax
    Sign up your client for Making Tax Digital for Income Tax - GOV.UK
  3. Start using BrightBooks and BrightAccountsProduction Bookkeeping for your MTD for Income Tax Self Assessment returns.

By completing the first step of the sign-up process you can check if your client is eligible to use MTD for Income Tax voluntarily before April 2026.

Signing up early will mean you and your clients can get used to the new process before it becomes mandatory.

If you don’t sign up early, we would still recommend that you and your clients start practicing new ways 
of digital record keeping to make it easier for you to transition to MTD later.

Prerequisites

The business’s Country of Incorporation must be one of the following: United Kingdom, England, Scotland, Wales, or Northern Ireland.

The business’s Entity Type must be set as Sole Trader, Farmer, or Individual.

MTD Settings

Before submitting an MTD ITSA return to HMRC, you need to log in to the HMRC online service and grant BrightBooks permission to view and update the business’s self-assessment details. To do this:

  • Go to Settings > MTD > MTD ITSA Setup.
  • The first time you access this, you will be redirected to the HMRC website and prompted to 'Allow your software to connect with HMRC'—this grants BrightBooks permission to view and amend the business’s self-assessment information.
  • Click Continue.
  • You will then be informed about the credentials required to sign in (your HMRC user ID and password).
  • Click Sign in to the HMRC online service.
  • Enter your HMRC user ID and password, then click Sign in.
  • You will be asked to grant BrightBooks permission to access and update the self-assessment details. Click Give permission.
  • Note: This permission lasts for 18 months, after which it must be renewed. You can revoke this permission anytime via the HMRC online service.
  • You will be redirected back to BrightBooks MTD ITSA setup, where you must enter the business’s National Insurance Number (NINO).
  • Upon entering a valid NINO, the system will automatically retrieve the corresponding MTD Tax ID, Accounting Method (Accruals or Cash), Tax Quarter (Standard or Calendar), and Tax Year (e.g., 2025-26).
  • Note: These details can only be updated through the HMRC online service.
  • Click Save to save your settings and close the setup screen.

You are now ready to view and submit your quarterly MTD ITSA returns.

Quarterly Returns

To access the MTD ITSA quarterly returns:

  • Navigate to Nominal Ledger > MTD ITSA.
  • The first time you access this, the list of obligations will be downloaded from HMRC.

You will see the following information:

  • The quarterly return start and end dates (based on the Tax Quarter Type; for example, Calendar shows 1 July 25 to 30 September 25, while Standard shows 6 July 25 to 5 October 25).
  • The return due date.
  • The date the return was received by HMRC, if applicable (Date Received).
  • The Return Status, which can be:
    • Fulfilled – generated, submitted, and accepted by HMRC,
    • Generated – created but not yet submitted,
    • Submitted – generated and submitted,
    • Open – neither generated nor submitted.
  • Who created the return, including the user’s name and the date & time of creation.

To submit a quarterly return:

  1. In the inline menu for the relevant period, click Generate.
  2. Confirm that you want to generate the return by clicking OK.
  3. A screen will appear showing the period related to the generated amounts, along with the required headings and details for HMRC, including:
    • Period Income
    • Period Expenses
    • Period Disallowed Expenses
  4. You can click Close to cancel this return, or click Save if you're satisfied with the figures and ready to submit. After saving, the Return Status will change to Generated, and three additional options will appear in the inline menu:
  • View MTD ITSA Generated
  • Click View to display a summary of the return on screen.
  • Print MTD ITSA Generated
    • Click Print to generate the report. You will be asked to confirm; click Proceed.
    • The return report will be displayed, showing summary details at the top followed by supporting transaction details under each report heading.
    • Standard report buttons will be available at the top:
      • Print – outputs a PDF version of the report in a new tab.
      • Excel – downloads an Excel version of the report.
      • Save – downloads a PDF version of the report.
      • Email – opens a 'Send Email' form with the PDF attached, allowing you to enter recipients in the 'To' and 'CC' fields, add a subject, then send.
  • Submit MTD ITSA Generated
    • Click Submit to review the saved return summary. It is recommended to re-generate the report just before submitting to include any last-minute changes.
    • Confirm that the details are correct, then check the legal declaration stating the information is “True and Complete.”
    • Click Submit and confirm you wish to proceed by clicking Proceed.
    • The return will be submitted to HMRC, with a confirmation message displayed.
    • The Return Status will update to Submitted.

To verify whether a submitted return has been accepted by HMRC, follow these steps:

  1. Navigate to Nominal Ledger > MTD ITSA.
  2. Locate the relevant quarterly return in the list.
  3. Check the Return Status column for that period:
    • If the status is Fulfilled, it means the return has been generated, submitted, and accepted by HMRC.
    • If the status is still Submitted, the return has been submitted but not yet confirmed as accepted.
  4. Additionally, look for a Date Received field (if available), which shows the date HMRC acknowledged receipt of the return.

If you require further confirmation or encounter discrepancies, consult your HMRC online account or contact HMRC directly.

 

What should I do if I notice incorrect information in a generated return before submitting?

If you find incorrect information in a generated return before submitting it to HMRC, follow these steps:

  1. Do not submit the return.
  2. Review and update the source data or transactions that feed into the return to correct the inaccuracies.
  3. Once the data has been corrected, go back to the relevant period’s inline menu in Nominal Ledger > MTD ITSA.
  4. Click Generate again to create a new return with the updated figures.
  5. Verify that the corrected information appears accurately in the newly generated return.
  6. When you are confident the details are correct, proceed with Save and then submit the return.

This ensures only accurate data is submitted to HMRC and avoids the need for amending returns after submission.

To revoke or modify the permission you granted to BrightBooks in HMRC after the initial setup, follow these steps:

  1. Log in to your HMRC online account at the HMRC Government Gateway .
  2. Navigate to the Manage access to your tax records or Manage software permissions section (the exact wording may vary).
  3. Locate the permission you granted to BrightBooks for accessing your Self Assessment data.
  4. From there, you can either:
    • Revoke the permission entirely to stop BrightBooks from accessing or updating your data.
    • Modify or renew the permission if available.
  5. Confirm your changes.

Once revoked, BrightBooks will no longer be able to submit or view your MTD ITSA returns until permission is granted again.

If you need to update details like the Accounting Method or Tax Quarter, these must be changed directly via the HMRC online service.

If you have trouble finding these options, you may contact HMRC support for assistance.

Please Note: MTD Income Tax for Landlords (UK and Foreign Property Income) is not included in this release; it is planned for delivery in Q4 2025.

 

For further information please see our Making Tax Digital for Income Tax Hub