Making Tax Digital or MTD for Income Tax Self Assessment 

Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) will be a requirement from April 2024 (originally due in April 2023). 
This is part of the government’s 10-year plan to help businesses make accurate tax returns and to keep up to date with their tax affairs. Keeping digital records and sending updates to HMRC directly is intended to reduce errors, costs, and uncertainty by making tax part of everyday business record-keeping. 
Sole traders, partnerships and landlords with business or property income above £10,000 per year will need to submit records for income tax and Class 4 National Insurance Contributions (NICs) using MTD compatible software. 
It’s estimated that over four million taxpayers will need to keep records of their income and expenditure digitally and send a quarterly summary and an end of year report. 

What is MTD for  Income Tax Self Assessment? 

From 2024 you will be able to send all the information online for your Self Assessment tax return, not just your business or rental income. This will include: 
employment income 
bank and building society interest 
pension contributions 
student loan repayments. 

Preparing for ITSA  

You can start to prepare and test MTD for ITSA on a voluntary basis now if you are: 
a UK resident 
registered for Self Assessment with up to date returns and payments 
a sole trader with income from one business or a landlord who rents out UK property. 

Can anyone sign up now?  

If you need to report income from any other sources or receive other payments that are taxable or on which you claim tax relief you won’t be able to sign up at present.  
Additional ITSA software functionality will be needed before other personal income can be reported. 

What happens if I sign up for MTD for ITSA now? 

New businesses that want to join the ITSA pilot must first register for Income Tax with HMRC. 
You can leave the pilot if you decide it’s not working for you at the moment but you will need to participate from 2024. 
Alternatively, you can remain in the pilot and still send your Self Assessment tax return as normal. 
Signing up - To sign up you will need to: 
use MTD-compatible software 
keep digital records 
send a quarterly update summary of your business income and expenses 
submit your end of period statement 
submit a final declaration. 
You won’t need to complete a Self Assessment tax return as you do now. 
However, you’ll still need to send HMRC a Self Assessment tax return for the tax year before you join ITSA. 
Each quarter you will receive an estimated tax calculation based on the information you have provided to help you budget for your tax. The quarters are: 
6 April to 5 July 
6 July to 5 October 
6 October to 5 January 
6 January to 5 April. 
Information - You will need to submit details of your invoices and receipts for purchases and, as a minimum, these should include the date, the amount, and the category of income or expense. 
If you already use record keeping software you will need to check whether it is MTD-compatible or can be integrated with bridging software to make your quarterly submissions. 
If you currently use spreadsheets to keep your records you’ll need MTD-compatible software to send your quarterly updates to HMRC. 

What is MTD compatible software? 

The software you use to keep your digital tax records will have to communicate with the HMRC’s systems to allow you to file your returns. 
If your accounting software is only installed on your office computer you might need to update it. 
If you’re using cloud-based accounting software and can access your data at any time and from anywhere it will probably automatically update to meet the requirements for MTD. 
Check with your supplier in advance to confirm that your software will meet the requirements of MTD for ITSA. 

For your information... 

You can find more helpful information on the Chartered Institute of Taxation website. 
All of our services are tailored to your requirements so call us on 01234 247507 or Email to discuss how we  
can help you best. 


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