What is MTD? What is ITSA MTD?
Making Tax Digital – because who doesn’t love an acronym
Making Tax Digital Income Tax Self Assessment – an even longer acronym, which includes anyone who receives self employment or property income of more than £10000
You’ve probably heard of it, HMRC may have written to you, it’s likely popped up on your social media. But what is it?
MTD isn’t actually new, most VAT returns have had to be submitted digitally since 2019, and payroll records since 2013. What is new, however, is that HMRC is asking that all returns, including for self employed people are sent digitally, to help make it easier for individuals and businesses to keep on top of their tax affairs.
At its simplest level, it’s how HMRC want you to report your income on a quarterly basis. Your returns will need to be sent digitally, via accounts software, helping you keep accurate and timely accounts. Eventually, tax legislation will exclude paper records entirely.
There will be software options from most software providers, as well as free options, and “bridging” software for older or specialist accounts packages. Your existing software will most likely need updating, or if you are not using software, its time to have a look for some!
Currently, as a sole trader, you only need to submit self assessment tax returns once a year, 10 months after the end of the tax year. MTD ITSA means that you will need to report your income every quarter, with a final submission at the end of the tax year, which will effectively “close” the year, and give you your final tax bill. You won’t need to pay your bill any sooner, it will still be due 31st January. The submission itself will be easy, its just a few mouse clicks, your software will help make sure all the right information is in the right boxes.
So what do I need to do?
If you already keep your accounts up to date, great news, you probably wont need to do much else, except perhaps update your software. If you leave it to the last minute, now is the time to start getting ahead, and get some good accounting habits in place. Our packages offer lots of solutions, from software only, to a full service package, via a support package. Whichever package you use, we aim to make it as easy as possible for you, with software that automatically collects your purchase invoices and matches it to bank transactions, and process guides based on years of experience, and a desire to make things easy for everyone involved.
In September 2021 HMRC announced that MTD has been delayed, the new deadlines are now
April 2022 – MTD will become compulsory for VAT registered companies with a turnover under £85000
April 2024 – MTD will apply to taxpayers who complete SATRs for self-employment income, or property income over £10000
But – at BlackCat accounts we are committed to ensuring that all our clients are MTD ready well ahead of the deadline, we see this as a fantastic opportunity for businesses to really understand their accounts in real time or to “know as you go”