Are you ready for MTD?
Making Tax Digital for income tax self-assessment may still be 18 months away, but if you are self-employed or a landlord, it is time to get ready for digital record keeping, ahead of the deadline.
MTD ITSA (as it’s known) is set to begin on 6 April 2023, and it looks like businesses will need to enter the new regime from the first accounting period commencing on or after 1 April 2023; the proposed basis period rules deem an accounting period ending on 31 March as ending on 5 April.
More than four million taxpayers are set to start MTD ITSA from 6 April 2023, and the current timetable has met fierce opposition. The limited nature of the pilot scheme has not helped.
How MTD ITSA will work
MTD ITSA will initially apply to the self-employed and landlords with total annual turnover exceeding £10,000. There is no exclusion if you have, say, £6,000 of trading income and £6,000 of rental income.
- Income and expenditure will have to be recorded digitally. Spreadsheets are fine, but, if you do it yourself, MTD-compatible software will be needed to submit quarterly updates.
- A quarterly summary of income and expenses must be sent to HMRC, with a final declaration replacing the self assessment tax return.
- There will be a new penalty system and no soft landing. However, a late filing penalty will not apply until four quarterly submissions are late.
The biggest impact will be for those currently maintaining paper records. A move to spreadsheets should not be too onerous, however, and it will then be fairly straightforward to use these as a basis for the filing requirements.
If you are thinking of moving to a software package, be warned there are currently only seven providers of suitable software. HMRC has issued guidance on MTD ITSA and of course we’re here to help.