What is MTD ITSA?
Under MTD for ITSA, businesses, self-employed individuals and landlords will keep digital records, and send a quarterly summary of their business income and expenses to HMRC using MTD-compatible software. In response they will receive an estimated tax calculation based on the information provided to help them budget for their tax. At the end of the year, they can add any non-business information and finalise their tax affairs using MTD-compatible software. This will replace the need for a Self-Assessment tax return.
The government has announced a further delay to the introduction of Making Tax Digital for Income Tax Self-Assessment (MTD ITSA). Why this change and what is the new timeframe?
In a statement released on 19 December, the government has finally acknowledged that MTD ITSA is a significant change for all concerned, and that launching during an economic crisis is not ideal. MTD ITSA will now be delayed until April 2026, with the self-employed and landlords with turnover in excess of £50,000 joining first. Those with income over £30,000 but not exceeding £50,000 will not need to join until April 2027. A start date for general partnerships has not yet been announced. Prior to this announcement, the mandatory use of software to remain compliant was set for April 2024.
The government will now review the needs of smaller businesses before asking those earning less than £30,000 to join. Previously MTD ITSA was going to be mandatory for the self-employed/landlords earning over £10,000. Given the expected additional costs and administrative burden for small businesses this will undoubtedly be a very welcome change. However, HMRC will have its work cut out when operating different systems for self-assessment customers so further delays could be on the cards.
Note. This does not affect the move to tax year basis periods, which will be effective from 2024/25 after next year’s transition.
What can you do to prepare for the introduction of MTD ITSA?
Despite the pushing back of this significant change to how self-employed/landlords record their income and expenses; it is important that those impacted turn their attention towards what they need to do to stay compliant when MTD ITSA goes live. Getting the right system in place for both compliance and your needs is the first step to preparing for Making Tax Digital.
The good news is there are plenty of software options on the market for both the self-employed and individuals that are compliant for MTD ITSA. If you wish to discuss these options, please get in touch with OCL and speak with one of the team.
Approaching deadline for capital allowances ‘super-deduction’ for limited companies: For two years from 1 April 2021 until the end of March 2023, any investments your business makes in main rate (main pool) plant and machinery will qualify for a 130% capital allowance deduction. The final deadline to take advantage of this super deduction is just a few months away. If you are considering a capital equipment purchase for your business, it’s worth taking note of this deadline and the tax saving opportunity the super deduction represents. Please get in touch with one of our team if you need to discuss further.
For tax saving tips contact us – call Tristan Wilcox-Jones, Samantha Taylor or Lucas Knight on 01225 445507 | oclaccountancy.com
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