Compliance
Compliance Readiness: UK Making Tax Digital and Self-Assessment Thresholds Update
UK taxpayers face major administrative change—new thresholds for Self-Assessment and mandatory reporting under Making Tax Digital make early compliance crucial.
By NomadicTax Research Team • 5-8 min read • November 23, 2025
## Background to the ITSA Threshold Update
- Under the **Spring 2025 Tax Update**, the UK government announced that the threshold for trading, property and “other taxable income” will be aligned at **£3,000 gross** per source, reducing the number of taxpayers required to submit full **Self-Assessment returns**. ([gov.uk](https://www.gov.uk/government/publications/summary-of-tax-update-spring-2025-simplification-administration-and-reform/tax-update-spring-2025-simplification-administration-and-reform-summary?utm_source=openai))
- Concurrently, **Making Tax Digital for Income Tax Self Assessment (MTD for ITSA)** is rolling out: the new regime becomes obligatory for those with trading or property income over **£20,000** starting **6 April 2028**, along with other detailed changes. ([gov.uk](https://www.gov.uk/government/publications/summary-of-tax-update-spring-2025-simplification-administration-and-reform/tax-update-spring-2025-simplification-administration-and-reform-summary?utm_source=openai))
## What Individuals and Businesses Must Do Now
- **Track income sources**: Keep gross income from trading, property & others separately; if any exceeds **£3,000**, Self-Assessment may be required.
- **Register early for MTD-ITSA**: Even before April 2028, make sure software and bookkeeping are capable of digital submission.
- **Choose method**: Taxpayers below threshold will have option to remain in Self-Assessment or use a simplified digital reporting service. ([gov.uk](https://www.gov.uk/government/publications/summary-of-tax-update-spring-2025-simplification-administration-and-reform/tax-update-spring-2025-simplification-administration-and-reform-summary?utm_source=openai))
## Examples
- **Landlord** earning £2,500 rental income annually and £1,000 side freelancing income: total “property + other” sources each below £3,000; under new rules, may avoid full Self-Assessment if no other requirement triggers it.
- **Small business owner** with £25,000 income: above MTD-ITSA threshold; must prepare finances digitally for reporting and submission-ready by software from 6 April 2028.
## Practical Steps for Compliance Teams
- **Software readiness**: ensure accounting packages support MTD-ITSA; digital ledgers, timely invoicing and expense tracking.
- **Education and training**: Business owners, accountants, and finance departments need training on thresholds and rules.
- **Record keeping**: Maintain supporting records for deductions, business expenses, and income sources; separate trading vs passive income.
## Timeline Summary
- **Now**: understand your income sources; decide whether to stay with Self-Assessment or transition to digital reporting if eligible.
- **6 April 2025**: CGT rates for carried interest increase; non-employment income threshold alignment at £3,000 becomes effective soon after announcement. ([gov.uk](https://www.gov.uk/government/publications/carried-interest-rates-of-capital-gains-tax/capital-gains-tax-rates-of-tax-carried-interest?utm_source=openai))
- **6 April 2026**: Carried interest new regime fully effective. ([gov.uk](https://www.gov.uk/government/publications/reform-of-the-tax-treatment-of-carried-interest/revised-tax-regime-for-carried-interest?utm_source=openai))
- **6 April 2028**: MTD-ITSA becomes mandatory for those over the £20,000 limit. ([gov.uk](https://www.gov.uk/government/publications/summary-of-tax-update-spring-2025-simplification-administration-and-reform/tax-update-spring-2025-simplification-administration-and-reform-summary?utm_source=openai))