Businesses have known for some time about the introduction of Making Tax Digital for VAT (see our previous blog about it), but we also now need to be aware of the roll-out of Making Tax Digital for Income Tax Self Assessment (MTD ITSA).

The details of MTD ITSA are still being finalised but what we know is that the start date will most likely be 6 April 2023 and it will apply to unincorporated businesses (i.e. self-employed people and partnerships) and landlords with total annual business or property income of £10,000 or more.

When should I file the return?

The confirmed quarterly filing dates are 5 August, 5 November, 5 February, 5 May. So the first quarter’s MTD submission is 5 August 2023. If your business year end falls on 31 March or 1, 2, 3 or 4 April, your filing date is also 5 August.

What information is included?

On each quarterly submission, your total sales income and total expenses (split into categories, probably as per the current self-employed self-assessment return, but yet to be confirmed) will be required. Your quarterly balance sheet statement is not required.

How will final adjustments be made?

Adjustments such as capital allowances or loss claims are made by the final submission date of 31 January in the following year. This is known as the EOPS (End Of Period Statement). This statement calculates your tax liability and HMRC expects that software providers will create this statement as part of the provision.

Deferrals and exemptions

There will be a deferral for partnerships containing a corporate partner, LLPs and limited partnerships. HMRC has indicated that there will be an exemption from joining MTD ITSA for:

  • Trusts (including those with property income)
  • Estates of the deceased
  • Trustees of registered pension schemes
  • Non-resident companies

If you are ‘digitally excluded’, you may be able to claim exemption, but if you have any access to the internet at home or your business premises (no matter the speed or reliability) you won’t be able to claim exemption. 

If you’re not VAT registered, you may have been putting off ‘going digital’ with your accounts. Now is the time to take the plunge with an approved software package such as Sage, Xero, Iris, FreeAgent, QuickBooks or KashFlow. Subscription to these can start from just £5 per month (although this usually rises after an introductory period).

These software platforms have been tested to be compatible with the MTD system. CRM has years of experience with accountancy software and can advise on the benefits and downfalls of each – which level is appropriate for your business and how to make the most of the features.

Not only is digital accountancy software a worthwhile investment in preparation for MTD, but when implemented correctly, it gives your business more control over its documents, better data security and instant backups, not to mention the reduced environmental impact that you’ll be making.

If you need any advice about your digital accounting software or Making Tax Digital for VAT or ITSA, CRM would love to hear from you on 01865 379272.

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