What is MTD ITSA?
- Making Tax Digital for Income Tax Self-Assessment.
Who could be affected by it?
- Self-employed individuals and landlords with a tax year turnover exceeding £10,000.
- Partnership which consists only of individual partners.
- The turnover threshold takes account of the combined turnover of a person’s total number of businesses and rental properties.
- Please note – MTD ITSA has been deferred, until a date yet to be decided, regarding partnerships with a corporate member, LLPs and Limited partnerships.
Are there any exemptions?
- Trades and/or rental income where the turnover does not exceed £10,000.
- A deceased person’s estate.
- Registered pension scheme trustees.
- Non-resident companies.
- Individuals who are able to claim they are digitally excluded.
What constitutes ‘digitally excluded’?
- Location – for example, you cannot obtain internet access at or near home or at work.
- Disability, which prevents you from using the software technology.
- Your religious beliefs.
What will MTD ITSA mean in practice?
- You will be required to maintain your trading/rental records in a digital format.
- Primarily, during the tax year, you will need to make quarterly digital submissions to HMRC of your income and expenses as regards your trade/rental business.
When does this first come into effect?
- April 2024 – Sole Traders and Landlords
- April 2025 – General partnerships
When do you have to make the quarterly submissions?
- 5th August – covering the 1st quarter to 5th
- 5th November – covering the 2nd quarter to 5th
- 5th February – covering the 3rd quarter to 5th
- 5th May – covering the 4th quarter to 5th
- The very first MTD ITSA submission will need to be made by 5th August 2023.
What will need to be included in the submissions?
- Details of trading/rental income and expenses for the quarter period concerned.
- It is likely to need to be broken down into categories similar to what is presently required for a self-assessment tax return.
Do I have to pay my tax over at the same time as the quarterly submissions?
- At present no, you continue to pay the tax over on 31st January and 31st July each year.
What happens after the 4th quarterly submission has been made?
- You have to make a further digital submission for the tax year called an end of period statement (EOPS).
- The EOPS enables you make the necessary adjustment to what has already been submitted in respect of things like capital allowances and losses.
- The EOPS must be submitted by 31st January following the end of the relevant tax year.
- An EOPS must be submitted for each trade.
Will I need to also complete a Self-Assessment Tax Return?
- Not if you are having to comply with MTD ITSA.
How will I declare my other income and capital gains disposals?
- A finalisation statement (FS) will also need to be submitted by 31st January following the end of the relevant tax year.
- You would include other income and gains not already reflected in the quarterly submissions on the FS.
What happens if I don’t comply?
- Financial penalties are likely to be imposed.
What do I need to do?
- DO NOT LEAVE IT TOO LATE TO ACT.
- Check to see if you are caught by the MTD ITSA rules.
- Check to see if you have HMRC compatible software to maintain and submit the relevant digital records.
How can we help?
- We can carry out an MTD ITSA review.
- Assist with the sourcing of the MTD ITSA compliant software.
- If required, train you on how to use that software.
- Ensure that the MTD quarterly submissions, EOPS and FS are submitted on time and advise on the tax and national insurance (if applicable) to be paid.
Please note
- This is based upon present HMRC draft proposals which may be subject to change.
If you wish to discuss any of these or other issues
please do contact us.