Making Tax Digital for Income Tax Self Assessment (MTDfITSA). Are you ready?
The Government has now pencilled in what they regard as a firm date to implement MTD for ITSA, for all landlords and business owners that have an income above £10,000.
The next accounting period starting on or after 06/04/2023 that meet the above mentioned criteria will need to be compiled & submitted via MTD-compatible software.
If you are self-employed or a landlord with a turnover greater than £10k, how will MTD affect you?
1. You will need to submit a quarterly summary of your businesses income & expenses to HMRC using MTD-compliant software. Yes, you read that correctly. No longer can you do your tax return in one go, with a lot of our customers leaving it to December or even January before they come to see us. As your tax agents, we would need your business transactions every 3 months, to compile, compute, and submit through to HMRC.
The timing of the quarterly updates is determined by the accounting period of the business but typically the 4 quarters will be:
- 6 April to 5 July
- 6 July to 5 October
- 6 October to 5 January
- 6 January to 5 April
2. All your income and expenses will need to be individually logged electronically. The technical term used is that every business transaction will have an ‘electronic signature’. These signatures will then be submitted to HMRC every 3 months and you will receive an estimated tax projection for the year based on the information provided.
3. At the end of the year, any non-business information, foreign income, other income, etc is added to finalise your tax affairs and submitted using the MTD-compatible software. This replaces the need for a Self Assessment tax return. You will then have the final tax figure for the year and, as it stands, the payment and submission deadlines stay unchanged.
Currently, software providers for MTD-compliant packages are working hard to be able to include additional information that is needed to be accounted for under Self Assessment, not just their business or rental income. This includes employment income, bank and building society interest, dividends, pension contributions, student loan repayment etc. Once these are in position from the major providers, I think we can confidently assume the 2023 deadline may become a reality for the majority of self assessments submitted in the UK.
What are the deeper implications of MTDfITSA?
As a self-employed business owner the considerations that need to be made are:
1. The change in your working practice where, every 3 months, you have to ensure your paperwork is in order to submit the figures through to HMRC.
2. Rising costs to either investing in subscription-based MTD-compliant software to manually track all your business transactions or possible increased accountancy fees for more detailed bookkeeping to comply with MTDfITSA.
3. The realisation that a strict business bank account where all your business transactions are logged will save you time & money for the above-mentioned points. This then will add extra costs in business bank charges.
Questions? Contact Us
If you have any questions about MTDfITSA then please do not hesitate to call Taxfile on 020 8761 8000 or contact us here. All our existing clients can rest assured that, as the regulations change, we have already been at the forefront of MTDfVAT, successfully supporting all out VAT clients for compiling and submitting MTD-compliant VAT returns for the last 2-years.
