Making Tax Digital for Income Tax (MTD ITSA) – The Next Stage

Making Tax Digital has already affected many business owners. Those who are VAT Registered should already be reporting their VAT Returns under the regime.

The next phase in HMRC’s plan to digitalise the UK tax system is to bring Making Tax Digital to the self employed and those with income from property.

When does it come in?

This comes into effect on 6th April 2024, so not too far away.

Does Making Tax Digital impact me?

It will impact self-employed businesses and property owners with turnover / gross rental income in excess of £10,000 a year.

So, what does this all mean?

Under MTD ITSA, information will need to be submitted quarterly to HMRC. The first quarterly submission will be for the 3 months ended 5th July 2024 and will be due by 5th August 2024.

Once all 4 quarterly submissions have been made, an end of period statement will then need to be submitted, bringing in any of the ‘end of year adjustments’ that your accountant might help you out with.

Then, after all of that, you still need to submit a self-assessment tax return declaring your trading profits, as well as any other income that you might have (salary, dividends, property, other investments, etc).

So, there will be 5 additional submissions to make, on top of the self-assessment tax return that you should currently be submitting.

If you have a business which turns over more than £10,000 a year, and also have rental properties that generate more than £10,000 in gross rental income, you will need to make separate submissions for each.

In that case, there would be 8 quarterly submissions, 2 end of period statements and these will then both go onto your self-assessment tax return.

How do I make these submissions?

Many business owners already use software to record their income and expenditure, however there are lots who do not. The new regime means that businesses will now need to utilise software, in some form, in order to make these quarterly submissions.

You can submit these quarterly returns yourself, or ask your accountant for help.

How much extra will this cost me?

The extra cost will depend on the complexity of your affairs, and how much of the work you intend to do yourself.

HMRC has given an undertaking that free MTD software will be made available to businesses with the most straight forward affairs. However there will likely be a small monthly fee for most of the software available.

If you have no intention of maintaining your accounting records yourself, using software, then you will need to pay a bookkeeper. If you do wish to do it yourself, you may need to pay for training and ongoing support.

Then there are the submissions themselves. 4 quarterly submissions and an end of period statement, as well as your self-assessment tax return. The cost of these will likely depend on the amount of transactions that need to be reviewed before a submission can be made, to ensure it is correct.

I suggest you speak to your accountant to understand these extra costs sooner rather than later, so that you can begin to plan.

Can Kilby Fox help?

Absolutely!

If you’d like to better understand if and how Making Tax Digital for Income Tax will impact you, get in touch.

Just call on 01604 662670 or email martincrooke@kilbyfox.co.uk

Martin Crooke, Director, Kilby Fox

Martin Crooke is a Partner at Kilby Fox Chartered Accountants in Northampton. Martin specialises in helping small business owners gain financial control of their lives so they can focus on what they do best. He has been doing this for over 16 years.

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