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    Tag: MTD for ITSA

    MTD for ITSA deferred for 2 years

    Posted on by Helen Buchan

    The treasury has confirmed that there will be a delay of 2 years to the timetable for Making Tax Digital for Income Tax Self-Assessment. Due to come into effect from April 2024, this deadline has now been pushed to April 2026.

    This is welcome news given the overwhelming calls from tax and accounting bodies that the IT structure simply isn’t ready for implementation yet. However, it does mean it’s another movement of goalposts which makes it difficult for businesses and landlords to plan ahead with any degree of certainty.

    The full adjustments announced to the scope and timing of MTD for ITSA include:

    • The 2-year delay until April 2026 for mandatory MTD ITSA filing
    • Minimum income reporting level increased to £50,000, with those earning more than £30,000 mandated to join the scheme in 2027
    • The situation for landlords and sole traders earning less than £30,000 will be reviewed
    • Partnerships will not be brought into MTD for ITSA as previously planned in 2025
    • Points-based penalty system will be extended to MTD ITSA filers when they join

    The minister wrote, “The government understand businesses and self-employed individuals are currently facing a challenging economic environment, and that the transition for MTD for ITSA represents a significant change for taxpayers, their agents, and for HMRC.”

    They have allowed more time to prepare, “so that all businesses, self-employed individuals, and landlords within the scope of MTD for Income Tax, but particularly those with the smallest incomes, can adapt to the new ways of working.”

    The full statement can be read here.

    However, there has been no confirmation as to whether this is likely to impact the basis period reform for the self employed and partnerships. The timing of this was originally aligned to fit in with the start of MTD for ITSA in April 2024 to get everyone onto a real time, tax year basis of profit reporting.

    We will keep you updated on any further changes and how these may impact you.

    Get in Touch

    If you have any questions in relation to MTD for ITSA, please get in touch with your usual PM+M adviser or email enquiries@pmm.co.uk.

    MTD for ITSA Questions and Answers

    Posted on by Helen Buchan

    What does MTD for ITSA stand for?

    MTD for ITSA stands for Making Tax Digital for Income Tax Self-Assessment.

    What is MTD for ITSA?

    Essentially, it’s a fundamental change to the way personal tax information must be reported to HMRC.

    What will change when MTD for ITSA becomes compulsory?

    It will require digital record keeping and digital submissions, through your own software, of income and expense information on a quarterly basis, followed by an End of Period Statement (EOPS).

    Who will MTD for ITSA impact?

    MTD for ITSA will impact all taxpayers with a gross income of £10,000 or more from self-employment and/or property rental.

    When will the changes come into force?

    It is due to become compulsory in April 2024.

    Are there any exceptions to the changes?

    Trusts, estates, trustees of registered pension schemes and non-resident companies.

    General partnerships that earn more than £10,000 per year and have only individuals as partners (April 2025) and all other partnerships at a future date to be confirmed.

    Businesses exempt from MTD for VAT will also be exempt from MTD for ITSA and there will be digital exclusions available for some individuals.

    Do I need to do anything now?

    Whilst April 2024 may seem quite some time away, considering the changes and making adjustments to the way you record your income and expense information now could make your life much easier in the long run.

    How do I keep a digital record?

    The digital record keeping requirement will mean taxpayers will have to use an accounting-MTD software package to record all the financial transactions for the period.  This software will then prepare the quarterly returns and end of period statement.  A submission will be made via the software by a digital link to HMRC.

    How will the reporting requirements work?

    For each trading or property business, a quarterly report of income and expenses will need to be submitted. The first of these quarterly updates will be due for filing by 5 August 2024, and will cover either the quarter ended 5 July 2024, or 30 June 2024 (where a calendar quarter election is in place).

    Separate quarterly updates will be required for each trade or category of property business but there is no requirement to make tax or accounting adjustments to the information provided in quarterly updates.

    An end of period statement, EOPS, for each business is required and effectively replaces the tax return for those income sources.

    The EOPS will cover the tax year (regardless of the accounting period of the business) and will be due for filing by the normal self-assessment deadline of 31 January following the relevant tax year. All property businesses must use the tax year as the accounting basis period, but trades can use any accounting period.

    The MTD ITSA regime will incorporate all the reporting required on the current self-assessment tax return into a ‘finalisation’ or ‘crystallisation’ statement. This statement will bring together all the information included in the MTD reports, plus other taxable income, such as investment and employment income, to calculate the tax liability for the tax year. This will be due by 31 January after the end of the tax year.

    This is in total 6 reports that need to be filed with HMRC – 4 x quarterly reports; 1 x EOPS; 1 x tax return.

    Other considerations

    There are lots of changes coming and it is important that you are equipped with the information needed and well prepared to implement the required changes before they become compulsory. Our dedicated MTD for ITSA team are perfectly positioned to support you and your business, and will be happy to chat through how the changes are going to impact you. Get in touch by emailing enquiries@pmm.co.uk or calling 01254 679131.

    A comment to note that the article does not constitute personalised advice and that advice should be sought before taking any action.

    Making Tax Digital for Income Tax Self-Assessment

    Posted on by Helen Buchan

    Making tax digital for income tax Self-Assessment (MTD-ITSA) will become compulsory from April 2024 and whilst this may seem quite some time away, considering the changes and making adjustments to the way you record your income and expense information now could make your life much easier in the long run.

    What is MTD-ITSA?

    Essentially, it’s a fundamental change to the way personal tax information must be reported to HMRC.

    It will require digital record keeping and digital submissions of income and expense information on a quarterly basis, followed by an annual statement. As mentioned, it is due to become compulsory in April 2024 for taxpayers with gross income of £10,000 or more from self-employment and/or property rental with the following exceptions:

    • Trusts, estates, trustees of registered pension schemes and non-resident companies
    • General partnerships that earn more than £10,000 per year and have only individuals as partners (April 2025) and all other partnerships at a future date to be confirmed

    Businesses exempt from MTD for VAT will also be exempt from MTD for ITSA and there will be digital exclusions available for some individuals.

    Record keeping

    The digital record keeping requirement will mean taxpayers will have to use an accounting-MTD software package to prepare the quarterly returns and end of period statement.

    Reporting

    For each trading or property business, a quarterly report of income and expenses will need to be submitted. The first of these quarterly updates will be due for filing by 5 August 2024, and will cover either the quarter ended 5 July 2024, or 30 June 2024 (where a calendar quarter election is in place).

    Separate quarterly updates will be required for each trade or category of property business but there is no requirement to make tax or accounting adjustments to the information provided in quarterly updates.

    An end of period statement, EOPS, for each business is required and effectively replaces the tax return for those income sources.

    The EOPS will cover the tax year (regardless of the accounting period of the business) and will be due for filing by the normal self-assessment deadline of 31 January following the relevant tax year. All property businesses must use the tax year as the accounting basis period, but trades can use any accounting period.

    The MTD ITSA regime will incorporate all the reporting required on the current self-assessment tax return into a ‘finalisation’ or ‘crystallisation’ statement. This statement will bring together all the information included in the MTD reports, plus other taxable income, such as investment and employment income, to calculate the tax liability for the tax year. This will be due by 31 January after the end of the tax year.

    In addition to MTD-ITSA there will also be changes to the tax year basis of assessment with transitional rules being introduced in 2023-24 under basis period reform for self-employed individuals and partnerships. If you are affected by basis period reform, this is something we can discuss further and assist you with.

    There are lots of changes coming and it is important that you are equipped with the information needed and well prepared to implement the required changes before they become compulsory. Our dedicated MTD-ITSA team are perfectly positioned to support you and your business, and will be happy to chat through how the changes are going to impact you. Get in touch by emailing enquiries@pmm.co.uk or calling 01254 679131.

    A comment to note that the article does not constitute personalised advice and that advice should be sought before taking any action.

    Making Tax Digital for Income Tax Self-Assessment: a basic guide

    Posted on by Laura Boyd

    Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) brings a fundamental change to the way personal tax information must be reported to HMRC.

    It will require digital record keeping and digital submissions of income and expense information on a quarterly basis, followed by an annual statement. It is due to become compulsory in April 2024 for taxpayers with gross income of £10,000 or more from self-employment and/or property rental with the following exceptions:

    • Trusts, estates, trustees of registered pension schemes and non-resident companies
    • General partnerships that earn more than £10,000 per year and have only individuals as partners (April 2025) and all other partnerships at a future date which is to be confirmed

    Businesses exempt from MTD for VAT will also be exempt from MTD for ITSA and there will be digital exclusions available for some individuals.

    Record keeping

    The digital record keeping requirement will mean taxpayers will have to use an accounting-MTD software package to prepare the quarterly returns and end of period statement.

    Reporting

    For each trading or property business, a quarterly report of income and expenses will need to be submitted. The first of these quarterly updates will be due for filing by 5 August 2024, and will cover either the quarter ended 5 July 2024, or 30 June 2024 (where a calendar quarter election is in place).

    Separate quarterly updates will be required for each trade or category of property business but there is no requirement to make tax or accounting adjustments to the information provided in quarterly updates.

    An end of period statement (EOPS) for each business is required and effectively replaces the tax return for those income sources.

    The EOPS will cover the tax year (regardless of the accounting period of the business) and will be due for filing by the normal self-assessment deadline of 31 January following the relevant tax year. All property businesses must use the tax year as the accounting basis period, but trades can use any accounting period.

    The MTD for ITSA regime will incorporate all the reporting required on the current self-assessment tax return into a ‘finalisation’ or ‘crystallisation’ statement. This statement will bring together all the information included in the MTD reports, plus other taxable income, such as investment and employment income, to calculate the tax liability for the tax year. This will be due by 31 January after the end of the tax year.

    In addition to MTD for ITSA, there will also be changes to the tax year basis of assessment with transitional rules being introduced in 2023-24 under basis period reform for self-employed individuals and partnerships. We are yet to receive detailed guidance from HMRC on the practicalities of the reform.

    Get in touch

    Making Tax Digital is bringing lots of changes, but we are perfectly positioned to support you and your business before the official launch in April 2024. Prepare now and overcome any challenges with the transition to digital before the new rules come into force. Get in touch to discuss MTD for ITSA in more detail by emailing enquiries@pmm.co.uk.