Making Tax Digital also known as MTD is a part of the government’s ambition. Its purpose is to be one of the most digitally advanced tax authorities in the whole wide world. When Making Tax Digital (MTD) was first announced one unique caption caught my eye. This particular headline which was ‘Making tax easier: the end of the tax retrieval’ was found in a document published in 2015. However, in 2022, I soon realized this unique caption was rather a misleading one.

Now, what does MTD imply for Self-assessment taxpayers? Well, it’s pretty simple actually. From April 2024, All businesses, as well as landlords whose gross income from either self-employment or rent is greater or is equal to 10,000 pounds, will be required to keep a digital record. They will be needed to make submissions of their data to HMRC electronically.

Things You Must Know About MTD ITSA

1. Business records and data should be kept electronically. Although spreadsheets can be used, it’s more appropriate to use online accounting software and apps such as Cloud accounting software for businesses to fulfill the very first condition.
2. Starting from April 2024, all sole traders and landlords must comply with MTD ITSA. The partnership does not need to conform until April 2025. LLP’s partnership with corporate partners will need to comply from a date that is yet to be confirmed. Hence, the date is left to decide in the future 
3. Some Taxpayers will not be required to follow MTD. That is if their combined business and rental income is less than £10,000 in tax from the year 2022 to 2023.
4. New and existing enterprises with a turnover that surpasses £10,000 for the first time will be needed to follow MTD from the 6th of April. For example, a new business that initiates trading in April 2024 and exceeds the turnover test on 5 April 2025 only after 12 months. Such a business will be required to follow MTD from the sixth of April 2026.
5. An exemption will be applied for those that are digitally excluded. For example, those who do not use computers or electronics for religious reasons or those that are unable to use such electronics due to age, disability and location. Administrators, executors and trustees will also be exempted from compliance with MTD. It is to be noted that very few will be exempt from this regulation.

More About Making Tax Digital

1. Separate submission of data will be made for each business and rental type. For example, if a sole trader collects rental income from residential property and amasses income from a furnished holiday let. He /she will be required to make a total of 3 submissions of data under MTD ITSA. And if that sole trader is also enlisted for VAT, then he /she will be required to submit data under MTD VAT too. Hence the sole trader will have to submit data under both MTD ITSA and MTD VAT.
2. Quarterly submission of data will be required. This data must be electronically submitted to HMRC. These submissions may include designatory information like national insurance numbers and financial information including sales income and expenses. For landlords, the details of their properties will be needed.
3. The standard quarterly intervals are on normal quarter dates like the 30th of June, 30th September, 31st March and 31st December. The due date for these quarterly submissions is the fifth of August, the fifth of November, the fifth of February and the fifth of May.
4. A fifth submission will also be required that would include the financial data as well as the taxable profit of its businesses. This would be taken after making appropriate tax and accounting adjustments. This type of submission will also include information on other things like rental or non-trading income. This may also include pension or employment income, investment income or taxable savings. Lastly, a sixth submission will also be required to ensure that all the data submitted is accurate, definitive and final. The due date for these submissions would be 31 January following the tax year-end.
5. Due date of these tax payments will not change and will remain the same for the time being.

What you should do To Prepare for MTD ITSA

If you’re using accounting software to record transactions in your business then you should check. Whether it’s MTD compatible or not. If you’re not using any software then try consulting. Or take advice from your accountant to figure out which software is most suitable for you. Once you find the one that you are most comfortable with it would become easier for you to follow MTD requirements. One such software is Cloud accounting software which comes with many advantages and benefits. It is not only MTD compatible but it can also give your accountant to empower you and give you useful advice on real-time tax estimates and planning tips.

If you are a landlord or small business with an income less than £150,000, then consider using a ‘cash basis’ for accounting. It is much simpler to account for expenses and income. It would also make it easier for you to compile data for submitting under MTD ITSA.

If you are not required to comply with MTD, then there’s no need to worry. You just have to continue filing your self-assessment tax return as you did before. Hence, on a serious note, for some taxpayers, it is not ‘the End of the tax return.

Top Tip

Get help and advice from your trustee accountant to choose the best possible Cloud accounting software as well as app and get started as soon as possible. Account-ease has an entire squad which is devoted to cloud accounting and is ready to help you. Therefore, you can get advice, support as well as training from account-ease.co.uk. Which will make it easier for you to comply with the requirements of MTD.