What is Making Tax Digital?

HMRC is modernising the UK tax system by “Making Tax Digital”. They’ve already done it with VAT and Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is next. What will it mean? No more annual Self Assessment tax returns for most. But if you’re affected, you’ll need to keep digital records of your income and costs and send summaries to HMRC every three months. And at the end of the year you must confirm that your numbers are accurate and make a final declaration. It’s simple, really.

Who DOES MTD FOR ITSA AFFECT?

I am a landlord

This is Nicky from Sale in Greater Manchester. She rents out a two-bed house in nearby Stretford, from which she earns taxable income of £11,000 a year. This is more than the £10,000 threshold, which means she’ll be affected by Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) when it’s introduced on 6 April 2024.

I’M A SOLE TRADER

Meet Macca . He’s a self-employed plasterer from Bristol who earns taxable income of almost £23,000 a year. Because this is more than the £10,000 threshold, Macca will be affected by Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) when it’s introduced on 6 April 2024.

I’M A SOLE TRADER & A LANDLORD

This is Bob from Norwich. Part-time taxi-driving work earns him taxable income of £2,500 a year. Bob also earns £8,000 of taxable rental income from a one-bedroom flat he owns in the city. Because this combined taxable income is more than the £10,000 a year, Bob will be affected by Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) when it’s introduced on 6 April 2024.

Making Tax Digital: Key Dates

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1 April 2019

HMRC introduced the first phase of MTD for VAT for businesses with a VAT-taxable turnover above the £85k annual threshold.

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1 April 2022

The second phase of MTD for VAT was introduced, with recording and reporting rules extended to all VAT-registered businesses.

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6 April 2024

Making Tax Digital for Income Tax Self Assessment will be introduced for sole traders and landlords with a taxable income of more than £10,000 a year.

HOW DO I GET READY FOR MTD FOR ITSA?

Read up so that you know what you’ll need to do when Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is introduced on 6 April 2024. That’s easy enough, especially as you’ll find key facts on this page, but you should also read our MTD blogs. And you’ll need MTD-compatible software that allows you to record and/or report your income and expenses every three months to HMRC.

WE CAN HELP YOU

We always try to make life and tax as easy as possible for sole traders, landlords and other taxpayers. That’s why we’re working on our very own Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) software. You’ll be able to use it to do everything you need to do to meet MTD for ITSA requirements. Sign up to receive our Mailing Tax Digital updates and we’ll let you know when and how you can get our MTD for ITSA software is ready.

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