December 20, 2022
Article
Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) was due to come in with effect from 6 April 2024 for all sole trade businesses and landlords with combined gross income of over £10,000. This is the next step in the Government’s plans to digitalise taxes and become “one of the most digitally advanced tax administrations in the world” and follows on from MTD for VAT that was made compulsory for all VAT registered businesses from April 2022.
In a U-turn announced just a few days before Christmas HMRC confirmed that MTD for ITSA would now not become mandatory until April 2026. They have also increased the income threshold from £10,000 to £50,000 for the April 2026 start date and those with income between £30,000 and 50,000 will have to comply from April 2027.
Whilst this represents a significant delay, HMRC have confirmed that they are committed to deliver MTD for ITSA. If you think you are likely to be affected and would like to take some steps to digitalise your records, then please contact us. The are many steps that you could take now to ensure that you are ready as we get closer to April 2026 such as:
- Ensuring you hold a dedicated business bank account will help when your records are kept digitally and will save you time when processing the details for the quarterly submissions. If you don’t currently have a separate bank account for each trade, you may want to consider opening a new account and this could be a traditional bank account or an online account which is now more readily available.
- If you currently use a manual cashbook to record your income and expenses, you may want to look at using Microsoft Excel instead, to start that “digital” journey.
- Returns will need to be submitted quarterly so you may want to start to get in the habit of completing the bookkeeping on a more regular basis, than you currently do. This might be looking at it every few months instead of once a year, for your tax return.
- You may also wish to bite the bullet and start to use MTD compliant software, such as Xero, now to allow yourself more time to adapt to the new ways of reporting ahead of it becoming compulsory. You may also want to make the most of the other advantages that keeping digital records can have, such as real time information being available to assist in cash flow and tax planning.
If this is something that you might be interested in, then please feel free to get in touch with your usual point of contact who will be able to assist you.