MTD for ITSA is coming.

Following the recent Government announcement, Making tax digital (“MTD”) is due to become mandatory for income tax self assessment (“ITSA”) from 6 April 2024.

This means the majority of individuals and partnerships will be required to complete quarterly reports of their income to HMRC under MTD. Returns will need to be filed within one month of the quarter end, meaning those with a 5 April year end will file their first MTD return by 5 August 2024.

This affects individuals who meet the following criteria:

• Sole trade income with turnover exceeding £10,000
• Property landlords with gross rental income (before deducting expenses) exceeding £10,000
• Individuals with a combination of any of the above that takes them over £10,000 of gross income

An end of year submission will also be required, where the details submitted in the quarterly reports will be reconciled and adjusted as necessary. The year end filing will also incorporate other sources of income for which quarterly reporting is not required, such as investment portfolio income, pensions and employment income.

All returns must be filed using MTD compatible software, with a new points based system for penalties if submissions are made late.

This is the latest step of HMRC’s goal to become one of the most digitally advanced tax administrations in the world. MTD for VAT has already been rolled out to most businesses and will become mandatory for all VAT registered businesses from 6 April 2022.

MTD for partners in “general partnerships” has been pushed back to April 2025, while the date that remaining partnerships are expected to join remains unconfirmed. It is also currently unclear what will represent a general partnership.

While it is not possible to confirm at this point the finer details of how HMRC will operate MTD for ITSA, and that despite the deadline having recently been pushed back again, we still cannot be certain that this will become mandatory on the proposed date, we are working towards ensuring that our clients are ready for online filing by April 2024. We already have experience of onboarding our VAT clients for MTD and are working with software providers to ensure we have the best solutions to ensure our clients are compliant with MTD for ITSA. We hope this change in reporting will also provide benefits to us and our clients, by having more current business information and being able to identify “real time” financial results.

We will be able to offer different levels of service depending on your requirements, from assisting with the year end return right through to a full bookkeeping package and filing all the quarterly returns. We will also be able to offer, in partnership with our software providers, training programs for those who want to use the software solution to undertake the record keeping themselves. We will provide more detail on our offerings in due course.

There is an HMRC pilot underway for MTD for ITSA, although the taxpayers that are currently able to use this are limited, with very few individuals satisfying the restricted criteria. Once the scope of the pilot is widened, we will be keen to identify clients to participate so we can test our MTD filing solutions with HMRC’s systems before the reporting becomes mandatory.

There is much to think about and, while the deadline seems like it is a long way in the future right now, we will be working with our clients and software providers to identify the solutions and roll these out well in advance of mandatory implementation, to make the transition for you as smooth as possible.