Making Tax Digital for Income Tax Self-assessment
Posted on 20th July 2022
Making Tax Digital for Income Tax Self-assessment (MTD for ITSA) will come into force from April 2024. It will apply to all individuals who have gross income over £10,000 from self-employment or property.
Why is this happening?
This is part of the government’s initiative to implement a fully digital tax system. MTD for VAT has now been fully rolled out. MTD for ITSA relating to Partnerships is expected to come into effect in April 2025 and MTD for Corporation Tax is expected in 2026.
You will need to keep digital records of your income and expenditure – this means using a piece of third party software, such as Xero, QuickBooks or FreeAgent to record your business transactions, if you are not already doing so.
You will also need to send quarterly updates to HMRC, instead of one annual tax return. The deadlines for these will be 5 August, 5 November, 5 February and 5 May. Additionally, an annual declaration and final period statement will be due by 31 January each year along with your balancing tax payment.
This means you will need to make 6 submissions to HMRC every year, instead of just the one, currently.
Does the software cost ?
Yes. Usually anything around or between £15 to £30 per month. However, currently FreeAgent is being offered free to any business that has a NatWest group business account, including the online business account, Mettle. This has been designed specifically with individual Landlords in mind.
What happens if I don’t do anything and/or miss the deadlines?
HMRC are introducing a penalty points scheme that will work in tandem with MTD for VAT. Once a certain points level is reached, fines will be imposed for non-compliance.
Can Marshes Accounting help me?
Absolutely. Marshes Accounting are FreeAgent accredited partners and can help you with getting this set up. We can prepare your accounts, returns and make submissions to HMRC and provide you with support throughout and going forward. We thoroughly recommend you getting set up for MTD for ITSA as soon as possible to give you plenty of time to get to familiarise yourself with the digital process and software.
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