Making Tax Digital (MTD) Compliance for Self-Assessment
MTD for Income Tax Self-Assessment (ITSA) is an initiative by the UK government to make tax accounting simpler for businesses and individuals such as sole traders. It replaces normal annual tax returns if you fully comply with the ITSA rules explained below.
Will I be affected by it?
Yes, if you:
1. are self-employed,
2. are a landlord, or
3. have a partnership that consists only of individual partners.
and
with a tax year turnover exceeding £10,000.
Are there any exemptions?
A few exemptions exist, such as trades and/or rental income where the turnover does not exceed £10,000, and cases involving a deceased person’s estate, registered pension scheme trustees, non-resident companies, and individuals who can claim they are digitally excluded.
What is ‘digitally excluded’ referring to?
This means that, for example, you cannot access the internet at or near your home or workplace due to your location. Also, if you have a disability that inhibits you from using software technology or if you have religious beliefs that hinder you from doing so.
Will MTD ITSA mean more work for me?
You will be required to provide your trading/rental records digitally. During the tax year, you will need to make quarterly digital submissions of your income and expenses for your trade/rental business to HMRC.
What would be the deadlines to file quarterly submissions?
The deadline is one month from the end of the quarter.
The schedule would run as follows:
- 1st quarter ending 5 July: 5 August
- 2nd quarter ending 5 October: 5 November
- 3rd Quarter ending 5 January: 5 February
- 4th Quarter ending 5 April: 5 May
- You must file an End of Period Statement (EOPS) to reflect any changes, such as capital allowances or losses, and submit it by the 31st of January following the end of the tax year on 5 April. For instance, an EOPS for the period ending on 5 April 2024 would need to be submitted by 31 January 2025. Each trade will require separate disclosure.
As of now, you will need to make your very first MTD ITSA submission by 5 August 2024. If you are fully compliant with MTD for ITSA you don’t need to file a tax return.
What do I need to include in the submissions?
You need to include details of your trading/rental income and expenses for the applicable quarter period. Most likely, you will need to break down your submission into categories like those required for a self-assessment tax return.
Do I have to pay my tax to HMRC at the same time as the quarterly submissions?
No, payment deadlines are still the same e.g. 31-January and 31-July.
Do I have to file a separate return for disclosing other incomes and capital gains?
If you are in this position, you will also need to submit a finalization statement (FS) by 31 January following the end of the relevant tax year, it will show other incomes and gains not already disclosed.
What will happen if I don’t comply?
HMRC is likely to charge fines.
Will the accountant charge extra for these quarterly submissions?
To be very honest, Yes, they will charge extra based on extra admin services and quarterly tax preparation services. If you get software through your accountants, they may allow some trade discounts to you. We provide 50% off the market price of QuickBooks Online to our clients.
What do I need to do?
1. Act now and don’t wait until the last minute.
2. Check to see if you are affected by the MTD ITSA rules.
3. Review your use of HMRC-compatible software so that you can maintain and submit the relevant records digitally.
Taxsteins Ltd is well aware of these changes and is fully compliant with the latest requirements of ITSA. Please give us a shout should you require further information at 02071559545 or drop us an email at info@taxsteins.co.uk
