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MTD for ITSA – get ready for the digitalisation of income tax

In just over 18 months, Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) will be introduced. It will change the way millions of self-employed business owners and landlords report their earnings to HMRC. While HMRC has yet to release the full guidance on MTD for ITSA, here is a brief outline of what we know so far.

When is MTD for ITSA starting?

MTD for ITSA will be introduced from 6 April 2024.

Who will MTD for ITSA affect?

MTD for ITSA will apply to self-employed business owners and landlords whose total gross income from these sources exceed £10,000.

General partnerships will not be required to join MTD for ITSA until April 2025.

The date other types of partnerships will be required to join will be confirmed in the future.

What will I have to do to comply with MTD for ITSA ?

To comply with MTD for ITSA you will be required to keep digital records of all business / property income and expenses.

You will need to use MTD-compatible software to submit quarterly updates of your business / property income and expenses to HMRC. Default quarters are set at 5th July, 5th October, 5th January and 5th April, though it is believed a calendar quarter election to 30th June, 30th September, 31st December and 31st March may be available. These updates are due one month after the end of each quarter. After the end of the tax year, End of Period Statements (EOPS) for the business / property income must be submitted to HMRC, along with a final declaration that brings together all other sources of income and claims for tax reliefs.

How can I prepare for MTD for ITSA?

The maintaining of digital records is fundamental. Some business owners and landlords may already be using MTD-compatible software to keep their business records digitally.

A pilot scheme is currently open, although fairly restrictive eligibility criteria mean not everyone who will be mandated into MTD for ITSA in April 2024 is currently able to sign up. It is hoped the eligibility criteria will be relaxed in the coming months, at which time we will look to enrol a number of our clients onto the pilot.

We will of course provide additional updates as more information become available.