Last month, HM Revenue & Customs (HMRC) updated existing guidance on the process of signing up for Making Tax Digital for Income Tax Self-Assessment (MTD ITSA), and on how certain individuals can meet requirements.

Signing up for MTD ITSA: Who and when?

Individuals that are registered for Self-Assessment, receive income from self-employment, property or both, and whose total qualifying income (before expenses are deducted) exceeds £10,000, are within scope of the rules and so must comply with the requirements.

HMRC confirms the following cannot sign up for MTD, unless qualifying income exceeds £10,000 and they wish to do so voluntarily:

  • Trustees, including a charitable trustee or a trustee of non-registered pension schemes;
  • a personal representative of a deceased individual;
  • a Lloyd’s member, in relation to their underwriting business;
  • and non-resident companies.

MTD ITSA will be formally introduced from 6 April 2024. Eligible taxpayers must have first submitted their 2022/23 tax return by 31 January 2024, to give HMRC chance to review qualifying income and communicate with those who are required to sign up.

Landlords and self-employed individuals who started their business post 6 April 2023 do not need to sign up for MTD ITSA until their first Self-Assessment Tax Return has been filed.

Partnerships will not be expected to comply until 6 April 2025.

HMRC suggests that individuals can sign up for MTD ITSA via an authorised software provider, or with the support of their agent if they have one.

Meeting MTD ITSA requirements

Taxpayers needing to comply with the requirements of MTD ITSA will need to use compatible software to:

  • create and store digital records of each of your business transactions
  • send updates of the totals of your business income and expenses every 3 months (5 August, 5 November, 5 February, and 5 May)
  • confirm end of period statements; and
  • make a final declaration by 31 January following the end of the tax year.

Once business income has been finalised, HMRC may request information relating to your personal income sources – i.e., dividends.

The information provided will then be used to generate your final Self-Assessment tax bill for that tax year.

In its guidance, HMRC confirms that taxpayers will need to re-authorise their software every 18 months but suggests that the software should prompt the taxpayer accordingly.

What we still don’t know about MTD ITSA

The guidance issued so far barely scratches the surface, with all manner of questions that remain unanswered – for example:

  • How will the system accommodate multi-agent authorisations?
  • In respect of the basis period reform, how will taxpayers transition from submitting quarterly updates on the 5th of the month, to following calendar quarters?
  • How will jointly owned property or husband/wife ownership be accounted for – i.e., the need to keep separate records, and aggregation of income from multiple portfolios?
  • How will non-resident landlords report their non-resident status, and be verified without the likes of a National Insurance (NI) number?

Caroline comments: “With MTD ITSA looming ever nearer, we are being drip fed little snippets of guidance here and there, though at a much slower pace than many would perhaps like.

“We are also acutely aware of the feeling amongst some industry professionals, that the initiative is not in a suitable position to be rolled out with any benefit to the taxpayer and so we will be keeping a close eye on implementation dates and relevant commentary.”

“We will continue to monitor developments, to decipher any further guidance given and to share whatever we glean with our clients to enable them to prepare for and comply with the changes.”

How can George Hay help?

Whilst it may not be clear exactly how you’ll be impacted by MTD ITSA, it is worth establishing whether or not you will be within scope of the new rules.

Our priority is to ensure that clients required to comply are equipped to do so, when the time comes, and to keep you fully informed (to the extent that we are able to) in the interim.

Our advisers, in Bedfordshire, Cambridgeshire, and Hertfordshire are here to help you navigate the changes and challenges that Making Tax Digital may bring; to talk to one of our friendly professionals, contact us today.

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