Making Tax Digital for Income Tax
ITSA REQUIREMENTS MUST BE MET BY
6 APRIL 2024
What is Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA)?
The government are keen to push for the digital submission of all of our tax filings to HMRC. This means that filing paper submissions will no longer be accepted. MTD for Income tax will require businesses to have their records held digitally on MTD compatible software, such as Xero.
Who is impacted?
Sole traders and landlords with income (not profits) above £10,000 will need to adhere to the new MTD for Income Tax legislation. Those with income below £10,000 can continue using the existing Self Assessment system.
N.B.
The threshold takes into account all qualifying income streams. If you had income of £6,000 as a sole trader and £6,000 as a landlord, your total income is £12,000, meaning you are above the £10,000 threshold.
Update
Some general partnerships will need to meet the Making Tax Digital for Income Tax requirements by 6 April 2025.
How often are submissions and payments required?
Submissions to HMRC will need to be made quarterly for each business, or more frequently should you choose to. There is also a requirement for an end-of-period statement.
Payments will remain as they are currently, which is 31 January after the tax year. Payments on account deadline will also remain on 31 July (if applicable).
When does MTD for Income Tax become law?
The government have announced that they have delayed the digitalisation of Income Tax until 6 April 2024. This gives sole traders and landlords an extra year to prepare for the transition.
If you want to get “ahead of the game”, you are able to sign up voluntarily now.
Updates
We will be providing detailed information once the full guidance has been released.
Update 15/12/2021 - With the introduction of MTD for self assessment, HMRC are pushing to change all year-end dates to 31 March/5 April. Although nothing has been decided yet, it is worth being aware that if this change does come into force, some sole traders could end up with very long accounting periods in one tax year. For example, a sole trader with a year-end of 30 April would have their normal 12 months of accounts, plus a further 11 months for the new accounting period ending 31 March. This means that effectively there would be 21 months of profit. HMRC are proposing that the ‘extra’ profits would be allowed to be spread as a transitional adjustment over 5 years.
