There have been a flurry of announcements recently from HMRC around the implementation of Making Tax Digital for Income Tax Self Assessment.
To recap MTD ITSA comes in from April 2024, and in summary:
- Applies to self Employed and Landlords with business income or rents over £10,000 a year
- Partnerships will also be mandated, but from April 2025
- Requirement to keep digital records, with either an App / Programme, or a Spreadsheet linked to HMRC with Bridging Software
- Requirement to submit quarterly tax returns for each business steam
- Requirement to complete annual End Of Period Statements and Crystallisation statements.
At its simplest for a small business with turnover over £10,000 this means six returns a year replacing the existing Self Assessment – if the small business owner also receives some rental income, then eleven returns a year.
The latest updates from HMRC cover content like:
- Which Income Streams need reporting separately (broadly Self Employment, UK Furnished Holiday Lets, EEA Furnished Holiday lets, other UK rental income, other non UK rental income)
- The content of the returns – broadly aligning to the Self Assessment supplement, each income stream would currently require, eg SA103F, SA105, SA106
- Use of three line accounts where turnover / rents less than £85,000
- How businesses will be selected for mandation in April 2024 – based on 2022-23 Self Assessment
- When new businesses / landlords, or those going over £10,000 for the first time, will need to join MTD ITSA – broadly the start of the second tax year after the year of breach, eg go over in 2024-25, join from April 2026
We’ve updated our guide to MTD for ITSA to reflect the latest changes. You can read this here:
Making Tax Digital – Income Tax
Please bear in mind there is still a lot of detail to emerge, so check back for updates.
We’ve also covered in that page how we may be adapting our services to support clients from April 2024 – as you would expect we are planning ahead and will be starting to get into this in more detail during 2023, as HMRCs requirements, some of which are yet to be published, become clearer.