Preparing for Making Tax Digital (MTD) ITSA Without Accounting Software

The introduction of Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) marks another major shift in how businesses and individuals manage their taxes. For accountants, businesses, and sole traders not currently using accounting software, this transition can feel overwhelming. But fear not—while MTD ITSA compliance may seem daunting, it is completely manageable with the right preparation and guidance.

This post will guide you through the essentials of complying with MTD ITSA, focusing on businesses that don’t already leverage accounting software. We'll break it down step-by-step and highlight the services we offer that can help make this transition smoother.

What is Making Tax Digital (MTD) ITSA?

Making Tax Digital (MTD) ITSA is HMRC's new initiative aimed at transforming income tax reporting. Starting in April 2026, individuals and businesses earning over £50,000 annually from self-employment or property income will need to switch to quarterly digital submissions. The threshold will drop to £30,000 in 2027. This new approach seeks to simplify tax processes, reduce errors, and encourage real-time updates to ease the financial burden at the end of the year.

For businesses relying on manual bookkeeping and spreadsheets—such as many SMEs—the changes may feel like a big leap, but with a few adjustments, compliance is achievable without major disruption.

Step-by-Step Guide to Getting MTD-ITSA-Ready Without Accounting Software

If you're not using accounting software, there are still ways you can comply with the new regulations without completely overhauling your methods.

1. Understand Your MTD-ITSA Obligations

The first step is understanding exactly what MTD ITSA requires. To comply, you must:

Keep digital records of your income and expenses.
File quarterly updates via HMRC-compatible software.
Submit an end-of-year final declaration.

For many, this will mean organizing their financial records in a way that can be digitally reported. Non-compliance could result in penalties, so preparation is key.

Need help understanding your exact obligations? Check out our Self Assessment services for expert advice tailored to your situation.

2. Leverage Digital Record-Keeping Tools

If you’re not ready to commit to full accounting software, you can start by using simpler digital tools to record transactions. HMRC requires records to be kept digitally, so switching from paper-based records to spreadsheets is a good first step. Tools like Google Sheets or Excel can help, though they should be formatted to meet MTD standards.

At Affotax, we can support you with bookkeeping to ensure your data is organized and MTD-ready. Reach out to explore how we can assist with converting your records to digital formats.

3. Work With an Accountant Early

Keeping your accounts compliant is significantly easier when you work with a professional. Accountants familiar with MTD can quickly evaluate your situation, highlight areas of inefficiency, and provide tailored solutions. An experienced accountant will also ensure that your quarterly updates contain accurate information, avoiding costly mistakes.

Explore our range of professional services:

4. Plan for Quarterly Submissions

Traditional tax submissions often happen once a year. However, under MTD, self-employed individuals and landlords will need to file quarterly submissions through compatible software. These require accurate and timely reporting of all income and expenses.

Concerned about managing your quarterly returns? Our Self-Assessment and VAT Return services can help you stay on top of the new filing requirements.

5. Know Your Expense Categories

One common challenge for SMEs transitioning to MTD is understanding which business expenses are eligible and how to categorize them. Maintaining clear, accurate categories for your expenses in your records will save time and reduce errors when filing quarterly.

We offer Bookkeeping services, ensuring every category and transaction complies with HMRC guidelines. Schedule a consultation here.

6. Review Corporation Tax Implications

For businesses structured as Limited Companies, ensuring MTD compliance won’t stop with ITSA. You also need to think about other tax obligations, including Corporation Tax. These additional layers of compliance might benefit from professional assistance to ensure nothing gets overlooked.

Does MTD affect your Limited Company? Speak with one of our specialists via our Corporation Tax services.

7. Consider Gradual Adoption of Software

Though many businesses prefer to avoid adopting full accounting platforms right away, the transition becomes significantly smoother with software. HMRC’s list of MTD-compatible tools includes free-to-use software options, ideal for small businesses testing the waters. Over time, you could graduate to more comprehensive solutions as your needs evolve.

We’re happy to advise on the best software option for your business’s specific requirements. Contact us to get started with a free consultation.

Benefits of Adopting MTD-ITSA Practices

Transitioning to compliance offers significant advantages for your long-term business success:

Improved Financial Management: Digital records highlight trends in income and spending, helping you identify ways to save or reinvest profits.
Reduced Errors: Automated calculations mean less risk of costly mistakes in your tax submissions.
Time Efficiency: Once quarter-end workflows are set up, they can save you countless hours compared to manual year-end reporting.
Access to Expert Insights: Accountants analyzing real-time data from digital records can provide more strategic advice throughout the year—not just during tax season.

Partnering with specialists like Affotax can help ease the transition while ensuring stronger financial outcomes for your business.

How Affotax Can Help You Transition to MTD ITSA

At Affotax, we make compliance simple and stress-free. From Self-Assessment services to Bookkeeping for SMEs, we offer end-to-end support tailored to meet your unique needs. We believe in empowering businesses to thrive, regardless of their accounting knowledge or tech skills.

Our comprehensive support includes:

Expert advice specific to your industry.
Laundry list of available related pages.
Practical solutions that simplify your workflow.

Check out our full suite of services, designed to suit businesses of any size.

Final Thoughts on MTD ITSA Compliance for Non-Software Users

Preparing for MTD when you don’t use accounting software doesn’t have to be overwhelming. While the new requirements demand greater organization and digital practices, they also present an opportunity to improve how you manage your finances.

That said, transitioning to compliant workflows requires sufficient preparation, particularly for businesses that have traditionally relied on manual systems. The good news? With professional guidance and the right tools, MTD compliance is completely achievable.

Don’t wait until deadlines loom closer—reach out to our team at Affotax today to explore how we can assist with streamlining your MTD-ITSA preparation. Contact us here to get started.

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