What is MTD for ITSA?
Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is a new way for self-employed business owners and landlords to report earnings and pay Income Tax.
MTD for ITSA will apply to individuals from April 2024, if their total gross income from self-employment and property exceeds £10,000 in a tax year.
It is a complete modernisation of the current self-assessment tax return process as clients will have to record and manipulate the data digitally (i.e. no paper receipts, bank statements) on an MTD compatible software.
What will it involve?
The first step for those effected will be to sign up for MTD for ITSA via HMRC.
MTD ITSA will then involve:
- Four quarterly updates to HMRC detailing income and expenses.
- End of Period Statement (EOPS).
- Final declaration at the end of the tax year (this will replace the annual self-assessment tax return).
Quarterly Summaries
Quarterly summaries will include details of the income and expenses for each self-employment and property business during each quarterly period. The standard quarterly periods in each tax year are:
- 6th April to 5th July
- 6th July to 5th October
- 6th October to 5th January
- 6th January to 5th April
These can also be made in line with the calendar quarters (i.e. 1st April – 30th June).
The deadlines for submitting quarterly updates are the same regardless of whether the business’s updates are based on standard quarterly periods or on calendar quarters. These are:
- 5th August
- 5th November
- 5th February
- 5th May
The Final Declaration & End of Period Statement:
The affected business owners and landlords will also be required to use their accounting software to finalise their overall tax position at the end of the year. They will have to add any relevant details about personal income and tax reliefs and include an end of period statement (EOPS). The final declaration will replace the Self Assessment tax return.
The deadline for finalising tax affairs and paying Income Tax isn’t changing. As with the current Self Assessment system, business owners will need to do both by 31st January of the following tax year.
Get in touch with a member of #TeamSAS for more advice or guidance
