Making Tax Digital for Income Tax Self-Assessment (MTD-ITSA)
What is MTD?
Making Tax Digital is a government initiative to form a more efficient, effective and digitally advanced tax system.
What is MTD – ITSA?
Making Tax Digital for Income tax or also known as MTD for Income Tax Self-Assessment (MTD for ITSA) will be applicable on a wide net of tax payers such as self-employed, landlords, most partnership businesses and even individuals and change the way they report their earnings to HMRC. MTD- ITSA will be introduced from 6th April, 2024.
Is MTD – ITSA applicable to me?
MTD – ITSA will be applicable on all self-employed business owners and landlords having total business/rental income of £10,000/year and above. To fall under MTD – ITSA all of your income has to come from your business and rental properties only.
How is MTD – ITSA different from my normal Self-Assessment return filing?
Business owners and landlords having an yearly turnover of £10,000 or more, will no longer be required to file an annual self-assessment return once MTD – ITSA is implemented.
Those who fall in the criteria will have to keep a digital record of all their transactions and submit four quarterly updates about their business income and expenses. At the end of the tax year, they will also have to send an end of period statement (EOPS) and a final declaration.
The deadlines for submitting quarterly updates will be the same for everyone who has to follow the MTD for Income Tax rules. From the start of the tax year on 6th April, these deadlines are:
- 5th August
- 5th November
- 5th February
- 5th May
These updates are due a month after the end of each quarter. At 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.
MTD – ITSA applies to me, are there any steps I need to take to make a smooth transition?
If you are a self-employed business owner and/or a landlord, you’ll need to make the following changes if you haven’t already to your business operations
- Keep records of all your expenses and income a digital format
- Implement a MTD – compatible software to keep your records digitally
- Speak to us or your accountant about setting up a MTD – compatible software and keeping digital record of your business expenses and income, so you are well prepared to make the transition.
