Preparing for MTD for ITSA

With the launch date confirmed, it’s time to begin preparing for MTD ITSA.

The introduction of Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) in 2024 forms part of HMRC’s ambitious plans of becoming one of the most digitally advanced tax administrations in the world. 

If you’re one of the 4.2 million taxpayers earning above £10,000 from business and property, you have less than two years until 6 April 2024 to prepare for MTD for ITSA. 

From April this year, all VAT-registered businesses have been mandated to keep digital VAT records and send returns using Making Tax Digital (MTD)- compatible software which means that fortunately many qualifying sole traders and landlords will already be prepared for MTD for ITSA. 

But for those at the beginning of this journey, here are some key things you need to know about MTD for ITSA.

Who needs to prepare for MTD for ITSA?

Sole traders and landlords with an overall income above £10,000 will need to keep digital records, using MTD compatible software. 

Unless you have an exemption, if you meet the criteria then you must comply with MTD for ITSA.

Those earning below the £10,000 threshold can continue to use the old HMRC system for filing their returns.

If you own multiple businesses, the income earned from all of them contributes to the £10,000 threshold.

What will I need to submit to HMRC for MTD for ITSA?

From 6 April 2024, you will need to keep digital records of income and expenditure. There are three parts you’ll need to submit for MTD for ITSA:

  1. Quarterly updates, including a summary of business income and expenditure.
  2. End of Period Statement (EOPS). You’ll need to submit one of these per year, at the end of your fourth quarter, for each source of income.
  3. Final declaration. You’ll need to share details of all other taxable income by 31 January each year, including investments and savings interest.

How do I prepare MTD for ITSA?

You need to sign up for MTD for ITSA through your cloud-based MTD compatible software, instead of on the HMRC website. This means that you’ll need HMRC-approved software in place ahead of time. If you’re looking for more information, HMRC’s guidance in signing up  is a handy resource.

HMRC will request the following information: business name, business start date, email address, national insurance number, accounting period, and accounting type to apply. Have this to hand when you are ready to register. 

While 2024 may feel like a long way away, it’s always worth getting prepared early. You can do that by signing up voluntarily to get used to MTD rules. You can find out whether you’re eligible for early MTD for ITSA registration here

Alternatively get in touch and we can talk through any questions you have relating to MTD for ITSA. 

Growing businesses need more from their accountant; as business accountants, analysts and advisors, we help you understand and manage your numbers to drive plans and decision making. If you would like to discuss the ways we can help you and your business, simply call 0800 112 0880 or email [email protected].

Details of MTD-compatible software products for Income Tax  are available on GOV.UK and this information will be updated as and when new products become available.

Read more articles from Focal Business Group.

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