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Making Tax Digital for Income Tax Self Assessments (MTD for ITSA) has faced numerous delays and has been pushed back more than once already. You would be forgiven for wondering if it’ll ever arrive. However, the change is coming with MTD for ITSA set to officially happen on the 6th of April 2024.
Sole traders and landlords with an overall income of over £10,000 will need to make a dramatic change to how they keep their financial records and the tools they use. This means keeping up-to-date and accurate financial records in digital format throughout the tax year. Landlords will be required to submit both quarterly summary updates of business income and expenditure to HMRC along with a final end-of-year summary. In order to do this, you will need to use MTD-compatible software or bridging software.
The implementation of MTD for ITSA signifies a big shift in the way many people keep their records. Whereas you might have only updated your accounts irregularly for the purpose of completing a self-assessment at the end of the year, you will now need to keep digital records from the very beginning of the tax year and be responsible for ensuring they are kept updated.
In order to stay compliant with the upcoming MTD for ITSA regulations, you will likely want to employ quality accounting software. Good software will help you streamline your entire record-keeping process and offer real-time financial insights allowing you to optimise elements of your business and improve profitability. The benefits could be significant and help you better manage your taxes.
All VAT-registered businesses have been required to comply with MTD from April this year, which means that many qualifying sole traders and landlords will have already taken this step forward. But for those at the beginning of this journey, here are some key things you need to know about MTD for ITSA.
Regardless of how you have kept your records up to this point, you’ll need to be ready for the MTD start date of 6 April 2024.
This may seem like it’s still a fair way off, however, as with adopting any new system there can be teething issues. We recommend getting yourself prepared early by finding an accounting software that suits your needs now, you can avoid any potential issues that might arise from such a dramatic shift in methodology.
The first thing to do is to find the software that’s both future-proof and right for you. One that will allow you to keep digital records in an efficient way. You will need to regularly update these records as well as digitise receipts and run key financial reports. As such the software you look for should offer cloud accounting, with a mobile app and receipt scanner.
What you don’t want to happen is to be scrambling for software last minute only to decide halfway through the year that you don’t like it and want to change it.
Finally, the software you choose needs to be MTD compatible. Landlord Studio is currently MTD compatible through our seamless integration with Xero. We are aiming to also be directly integrated and approved by the HMRC before the MTD for ITSA deadline.
Speak to your accountant or bookkeeper if you are thinking about registering early for MTD for ITSA (which you can do here).
MTD for ITSA will affect sole traders, self-employed individuals, and landlords earning above the £10,000 threshold (unless you have an exemption – see below).
If you own multiple businesses, then the income earned from all of these combined contributes to this £10,000 threshold.
However, those earning below the threshold can continue to use the old HMRC system for filing their returns.
The HMRC says that you can apply for an exemption from MTD ITSA if:
Additionally, the latest MTD ITSA policy update indicates that the following taxpayers may also be able to obtain an exemption (at least from when it first comes into effect):
Apply for an exemption
HMRC has confirmed that the quarterly filing deadlines for all unincorporated businesses filing under MTD for income tax will be: 5 August, 5 November, 5 February, and 5 May.
Those businesses with accounting dates of 31 March or 1, 2, 3, 4 April, will also file by these deadlines, so a business with a 31 March accounting date will have 5 extra days to file.
The first mandated MTD submission for the first quarter to 5 July 2024 will have to reach HMRC by 5 August 2024, which is a Saturday in the Summer Bank Holiday weekend in Scotland.
To sign up, you must be registered to file Self Assessment tax returns. You’ll need the Government Gateway user ID and password you use to file returns.
You must have software that’s compatible with Making Tax Digital for Income Tax before you sign up.
If you’re unsure how to proceed, you can ask your software provider, accountant, or bookkeeper how to sign up for MTD for ITSA.
When you sign up the HMRC will request the following information: business name, business start date, email address, national insurance number, accounting period, and accounting type to apply.
If you’re looking for more information, HMRC’s guidance on signing up is a handy resource.
From the deadline, you will need to keep digital records of income and expenditure. There are three parts you’ll need to submit for MTD for ITSA:
While it may feel like you have plenty of time to prepare for MTD for ITSA, it’s absolutely worth signing up early if you can or talking to your accountant about how you can get prepared. Taking the time to get used to the digital tools now will undoubtedly make the transition smoother.
Landlord Studio is a cloud accounting designed specifically for landlords. Easily track income and expenses on the go, digitise receipts, and instantly generate financial reports.
Landlords can also pair Landlord Studio’s suite of property management tools and easy-to-use income and expense tracking features with Xero using our seamless Xero integration.
Our Xero integration automatically syncs all financial data entered into Landlord Studio with your connected Xero account. Enabling users to take full advantage of Xero’s industry-leading accounting features and stay MTD compliant.
Landlord Studio will be HMRC approved before the 2024 deadline.
Related: Using Landlord Studio and Staying MTD Compliant
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