Heralded as a £360m revenue opportunity, Making Tax Digital for Income Tax (MTD ITSA) is part of a 10-year plan to modernise the tax administration system.

There are two interlocking sections to MTD: one is the data provided by taxpayers and the other is the processing of that data by HMRC to produce a tax liability, penalty or interest - sometimes all three.

What does MTD ITSA mean for taxpayers?

MTD ITSA will affect any individual earning over £10,000 gross income each year from self-employment or property. It means transforming their accounting records into a digital format, by recording data from business transactions digitally, which is most likely to be on a spreadsheet.

The second MTD requirement is to process that data in a way that avoids manual intervention. HMRC says that taking ‘human hands’ out of the accounting data processing eliminates errors such as mistyped figures, data entered in the wrong box, and transactions omitted completely from the accounting records.