As part of the ongoing efforts to modernise the UK tax system, HMRC is rolling out Making Tax Digital for Income Tax Self Assessment (MTD for ITSA).
This initiative aims to simplify tax reporting for self-employed individuals and landlords, ensuring greater accuracy and efficiency. Here’s what you need to know about the key benefits and timelines involved.
Key Benefits of MTD for ITSA
- Reduced Errors: By maintaining digital records and submitting updates quarterly, the risk of errors in tax returns is significantly reduced. This helps in minimising the tax gap and ensures more accurate tax reporting.
- Time Savings: Digital record-keeping and automated updates save time compared to traditional paper-based methods. This allows businesses to focus more on their core activities.
- Improved Financial Planning: Regular updates provide a clearer picture of financial health throughout the year, aiding better financial planning and decision-making.
- Enhanced Compliance: The digital system ensures that all tax obligations are met timely, reducing the likelihood of penalties and compliance issues.
Timelines for MTD for ITSA
- April 2026: MTD for ITSA becomes mandatory for self-employed individuals and landlords with an annual income over £50,000.
- April 2027: The threshold lowers, making MTD for ITSA mandatory for those with an annual income over £30,000.
- Future Plans: There are discussions about extending MTD for ITSA to those with incomes over £20,000 by the end of the current parliament.
Preparing for MTD for ITSA
To ensure a smooth transition, it’s crucial to start preparing now:
- Adopt Compatible Software: Ensure you have MTD-compatible software to maintain digital records and submit updates.
- Understand the Requirements: Familiarise yourself with the quarterly update process and the new penalty system that will be introduced alongside MTD for ITSA.
- Seek Professional Advice: Consult with your accountant to understand how these changes will impact your specific circumstances and to get assistance with the transition.
At Wood, Hicks & Co., we are committed to helping our clients navigate these changes seamlessly. Contact us today to learn more about how we can support you with MTD for ITSA.