Making Tax Digital for Income Tax Self-Assessment

What is MTD for ITSA?

Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) is due to launch in 2024, but you need to start preparing now. To help you, we’ll be releasing a series of articles to explain everything you need to do to get ahead of the curve and ensure a smooth, stress-free transition.

From the basics, benefits and process to key dates, we’ll make sure you’re well-informed, up to date and ready to go. You can check in with our quarterly blog articles, follow us on social media or get in touch with us directly.

Who is affected by MTD for ITSA?

Part of the government’s wider Making Tax Digital (MTD) initiative, MTD for ITSA is a new, digital way for self-employed business owners and landlords to report earnings and pay Income Tax.

MTD for ITSA will come into force from 6th April 2024 and will apply to self-employed business owners and landlords with a total business and/or property income above £10,000 per year. General partnerships will not be required to join MTD for ITSA until the tax year beginning in April 2025.

The date on which all other types of partnerships (for example, those that have corporate partners and Limited Liability Partnerships) will be required to join is yet to be announced.

When do I need to make submissions?

The new system differs to current Self-Assessment rules. Instead of one annual submission, business owners and landlords will be required to keep digital records and submit quarterly updates for business income and expenses using HMRC-approved software. This means gone are the days of simply being able to deliver to your accountant a box of paper receipts and invoices at the end of the year.

The standard quarterly periods and deadlines in each tax year are available from HMRC.

Business owners and landlords will also need to finalise their overall tax position at the end of the year and submit an End of Period Statement (EOPS) and a Final Declaration. The Final Declaration will replace the Self-Assessment tax return but the deadline for submission will still be 31st January.

It’s important to emphasise that the timeframes around the payment of Income Tax will remain as before. This purpose of the new quarterly submissions is to make it quicker to spot and rectify errors as they happen rather than waiting until the end of the tax year and dealing with compounded errors.

What software do I need?

The accounting software you choose must be MTD-compatible cloud accounting software. We recommend using Xero, the UK’s leading online accounting software.

Xero is easy to use, secure, efficient and 100% HMRC compliant. As a Xero Gold Partner, we can support you throughout the process, from getting set up to making submissions.

Why work with us?

In working with us and using Xero, we will ensure that getting ready for MTD for ITSA is easy, straightforward and stress-free — you can say goodbye to sifting through that painful pile of paper receipts and feel safe in the knowledge that your accounts are organised and under control all year round.

We’ll set up processes to make sure you never miss a submission deadline, give you more insight into financial data to help you steer your business, and provide clear updates on your quarterly submissions.

You won’t have to wait until the end of the year to know how much tax you need to pay — the ongoing nature of the new digital system and Xero’s capabilities mean we can provide an estimate of tax payable at any time in the year. With better insight into your finances and business performance, we can also offer additional tax planning advice to help reduce tax going forward.

Where can I learn more?

To find out more about everything Xero has to offer, check out their in-depth guides and videos. You can also get an overview of MTD for ITSA from HMRC.

At WCL we can talk to you about getting started and support you through every step of the process. Contact us today to find out more.