When will you have to register your new business for MTD?
The timetable for mandatory use of Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) by existing businesses is well established. But when must you use MTD ITSA if you start a new business or create a new income stream?
MTD joining deadlines
If you were a sole trader, landlord or both in 2024/25 you might be required to sign up to and start using Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) from April 2026, 2027 or 2028 depending on your annual turnover. The turnover limits that trigger mandatory use of MTD ITSA for those years are £50,000 in 2024/25, £30,000 in 2025/26 and £20,000 in 2026/27 respectively.
Example. James has been running a plumbing business since 2010. His turnover in 2024/25 was £49,000 and in 2025/26, £42,000. He’s not required to use MTD ITSA from April 2026 as his turnover was less than £50,000. However, he is required to use it from April 2027 because his turnover for 2025/26 exceeds £30,000. So far so good, but the position for new businesses is less well known.
New businesses - turnover trouble
If you first became a sole trader in 2024/25, say on 5 October 2024, and your turnover for that tax year was £26,000, you might assume that as you didn’t reach the threshold of £50,000 you won’t be required to use MTD ITSA from April 2026 - but you’d be wrong. You would be required to join MTD ITSA from 6 April 2026 because the turnover is measured for a full year’s trading.
Where a business runs for part of a year its turnover is pro rata. Therefore, in the circumstances described above the annual turnover figure would be £50,748 (£26,000 / 187 days x 365 days) which exceeds the trigger point for MTD ITSA.
The rule of thumb for deciding if and when you must use MTD ITSA is that you won’t need to until such time as you have, or were required, to submit a self-assessment tax return which shows turnover in excess of the corresponding MTD ITSA limit.
Keep in mind that the turnover figure is the aggregate from all your trades and rental income sources. For example, if in 2024/25 your turnover from trading was £39,000 and your rental income before expenses was £13,000, the total is £52,000. As this exceeds the £50,000 trigger point, you must use MTD ITSA from April 2026.
New source of qualifying income
The position can be equally tricky where you already have an MTD ITSA qualifying source of income and begin receiving income from a new source.
Example. Jaqui has been a mobile hairdresser for many years. Her turnover in 2024/25 is £18,000 and so well below the £50,000 that would trigger use of MTD ITSA in April 2026. At the beginning of July 2025 she inherits two rental properties from her mother. The rental income before expenses in 2025/26 is £9,600. This is equivalent to annual turnover of £12,560. Jaqui’s turnover from hairdressing in 2025/26 fell to £17,000. Thus, her total qualifying turnover is £29,560. As this falls short of the £30,000 MTD ITSA trigger for 2025/26, she won’t have to use MTD ITSA from April 2027.
Even if, after joining MTD ITSA, your turnover permanently falls below the limits, you must keep using it for another two years.
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