Sole traders, landlords, and other businesses earning from multiple resources or on ordinary partnerships that earn more than £10,000 annually have already been required from April this year to transition into making tax digital for income tax self-assessment (MTD for ITSA) rather than using the old HMRC website for filing tax returns, which will take full effect on April 2024.
This affects 2.6 million self-employed businesses, 1 million landlords, 0.2 million ordinary partnerships, and 380,000 businesses earning from multiple resources. Those earning less than £10,000 can continue using the traditional filing through the HMRC system as well as those who cannot practically or reasonably use computers, internet, or software.
Regardless if they follow the tax year or not, businesses will have a digital start date of 6 April 2024 by the next tax year. Despite several months given for preparation, HMRC encourages entrepreneurs to sign up or seek help from their accountants as early as they can to get used to the MTD rules, get organised, and make the transition smoother.
Signing up for their cloud-based software for MTD for ITSA, HMRC will ask them the following details of their business: name, start date, email address, National Insurance number, accounting period, and accounting type.
MTD for ITSA will make filing tax returns easier for businesses, as opposed to using spreadsheets, paper, or HMRC online platform as they can conveniently keep, maintain, and send a quarterly summary of their business income and expenditure in digital records to HMRC.
Digital records to be submitted for MTD for ITSA include quarterly updates (business income and expenditure summary), end of period statement (EOPS) once each year, and final declaration and other taxable income details (savings and investments interests) by 31 January every year.
Using MTD-compatible software, after April 2024, changes will be as follows:
- Four quarterly submissions for every business
- One annual End of Period Statement for every business
- One annual ‘Final Declaration’ submission for every individual
- Filing through MTD-compliant software
- Keeping digital records
Businesses should prepare now for the big task in 2024. If you are eligible for the MTD ITSA, make sure to hire an accountant to help you ease into the transition without anything amiss. Legend Financial provides comprehensive assistance from signing up your software, preparing your period updates, filing amended returns to correct errors & omissions, to making final declarations. Reach us today!
References
Here’s everything you need to know about MTD for ITSA. (n.a.). Retrieved from Xero: https://www.xero.com/blog/2022/04/mtd-for-itsa-preparation/
MTD for Income Tax Self Assessment. (n.a.). Retrieved from Xero: https://www.xero.com/uk/programme/making-tax-digital/income-tax-self-assessment/
Making Tax Digital exemptions. (n.a.). Retrieved from Xero: https://www.xero.com/uk/guides/mtd-for-vat/exemptions/
