Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA)
Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) legislation affects all individuals from April 2024. Where the gross income from self-employment and/or property exceeds £10,000 in any one tax year MTD for ITSA applies.
Partnerships with individuals as partners will also have to follow these same rules from April 2025.
Limited liability partnerships (LLPs) and partnerships with corporate partners will be required to join at a future date yet to be announced.
Eligible business owners and landlords have been able to sign up to MTD for Income Tax voluntarily since 2018 as part of a pilot scheme.
Under the new legislation self-employed business owners and landlords will need to report earnings and pay Income Tax on a quarterly basis. This is part of the government’s wider Making Tax Digital (MTD) initiative.
What are the MTD for Income Tax rules?
From 6th April 2024, all affected self-employed business owners and landlords will need to:
If you are unsure whether the rules will apply to you and when your submissions will be due, please do contact us at [email protected] or 01342 363277.
Quarterly summaries
Quarterly summaries will include details of the income and expenses for each self-employment and property business during each quarterly period. The standard quarterly periods in each tax year are:
Final declarationAffected business owners and landlords will also be required to use their accounting software to finalise their overall tax position at the end of the year. They will have to add any relevant details about personal income and tax reliefs and include an end of period statement (EOPS). The final declaration the Self-Assessment tax return.
The deadline for finalising tax affairs and paying Income Tax isn’t changing. As with the current Self-Assessment system, business owners will need to do both by 31st January of the following tax year. For example, for the 2024-25 tax year, business owners and landlords will have to submit their final declaration and pay their tax bill by midnight on 31st January 2026.
Our solution on offer for clients
As many business owners and property owners do not use electronic accounting platforms, we are mindful that this new legislation represents an extra cost burden on their business and will require time needed to undertake this work which distracts them from their more important functions of running their businesses.
As such, we have partnered up with Xero to be able to offer to all our clients the facility for us to undertake this quarterly process and submission for you in a cost-effective manner using your own Partner ledger version of Xero accounting system.
For clients with a limited number of accounting transactions we offer a fixed quarterly fee of £150 plus VAT for this work will include the subscription of this service within Xero, so you are able to budget a full costing for your year of this work with assurance that there will be no extras to pay. For clients incurring a larger volumn of transactions each quarter there may require an additional charge to process.
This will reduce the work required to produce your annual accounts and Final declaration (previously the annual self-assessment return) as your bank statement information will already be present in the Xero system.
There is also the advantage of being able to report on your financial position through the Xero online access which we will setup for you. This will give you a better understanding on how your business is performing.
We will setup Xero on your behalf and only ask that you send to us a csv file once a quarter of your bank account transactions. This csv file will be uploaded, coded and posted for you in Xero. This in turn will enable us to generate the quarterly transactions required for MTD ISA and submit on your behalf to HMRC via the Xero accounting functionality.
This will have the added value of creating your annual accounting records in the Xero system. As your business grows in the future you will already be setup and using the Xero system, so can very easily upgrade to one of the full access licenses if the business needs this service.
For clients already using Xero requiring MTD for ITSA, we can also undertake the quarterly task reviewing your data on a quarterly basis and submitting to HMRC on your behalf.
We are advising all clients who fall into this category to sign up for this service as soon as possible, as this will ensure that you are compliant before the deadline.
For more information on this service and details on how to get started, please contact us at [email protected] or 01342 363277.
Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) legislation affects all individuals from April 2024. Where the gross income from self-employment and/or property exceeds £10,000 in any one tax year MTD for ITSA applies.
Partnerships with individuals as partners will also have to follow these same rules from April 2025.
Limited liability partnerships (LLPs) and partnerships with corporate partners will be required to join at a future date yet to be announced.
Eligible business owners and landlords have been able to sign up to MTD for Income Tax voluntarily since 2018 as part of a pilot scheme.
Under the new legislation self-employed business owners and landlords will need to report earnings and pay Income Tax on a quarterly basis. This is part of the government’s wider Making Tax Digital (MTD) initiative.
What are the MTD for Income Tax rules?
From 6th April 2024, all affected self-employed business owners and landlords will need to:
- sign up for MTD for Income Tax via HMRC’s website.
- keep digital business records.
- use MTD compatible accounting software such as Xero.
- send quarterly business income and expenses updates to HMRC through the software
- finalise the business’s income in a declaration which confirms that the updates sent are correct and make any accounting adjustments.
- submit this final declaration to HMRC. This will replace the current annual Self-Assessment tax return.
If you are unsure whether the rules will apply to you and when your submissions will be due, please do contact us at [email protected] or 01342 363277.
Quarterly summaries
Quarterly summaries will include details of the income and expenses for each self-employment and property business during each quarterly period. The standard quarterly periods in each tax year are:
- 6th April to 5th July
- 6th July to 5th October
- 6th October to 5th January
- 6th January to 5th April
- 1st April to 30th June
- 1st July to 30th September
- 1st October to 31st December
- 1st January to 31st March
- 5th August
- 5th November
- 5th February
- 5th May
Final declarationAffected business owners and landlords will also be required to use their accounting software to finalise their overall tax position at the end of the year. They will have to add any relevant details about personal income and tax reliefs and include an end of period statement (EOPS). The final declaration the Self-Assessment tax return.
The deadline for finalising tax affairs and paying Income Tax isn’t changing. As with the current Self-Assessment system, business owners will need to do both by 31st January of the following tax year. For example, for the 2024-25 tax year, business owners and landlords will have to submit their final declaration and pay their tax bill by midnight on 31st January 2026.
Our solution on offer for clients
As many business owners and property owners do not use electronic accounting platforms, we are mindful that this new legislation represents an extra cost burden on their business and will require time needed to undertake this work which distracts them from their more important functions of running their businesses.
As such, we have partnered up with Xero to be able to offer to all our clients the facility for us to undertake this quarterly process and submission for you in a cost-effective manner using your own Partner ledger version of Xero accounting system.
For clients with a limited number of accounting transactions we offer a fixed quarterly fee of £150 plus VAT for this work will include the subscription of this service within Xero, so you are able to budget a full costing for your year of this work with assurance that there will be no extras to pay. For clients incurring a larger volumn of transactions each quarter there may require an additional charge to process.
This will reduce the work required to produce your annual accounts and Final declaration (previously the annual self-assessment return) as your bank statement information will already be present in the Xero system.
There is also the advantage of being able to report on your financial position through the Xero online access which we will setup for you. This will give you a better understanding on how your business is performing.
We will setup Xero on your behalf and only ask that you send to us a csv file once a quarter of your bank account transactions. This csv file will be uploaded, coded and posted for you in Xero. This in turn will enable us to generate the quarterly transactions required for MTD ISA and submit on your behalf to HMRC via the Xero accounting functionality.
This will have the added value of creating your annual accounting records in the Xero system. As your business grows in the future you will already be setup and using the Xero system, so can very easily upgrade to one of the full access licenses if the business needs this service.
For clients already using Xero requiring MTD for ITSA, we can also undertake the quarterly task reviewing your data on a quarterly basis and submitting to HMRC on your behalf.
We are advising all clients who fall into this category to sign up for this service as soon as possible, as this will ensure that you are compliant before the deadline.
For more information on this service and details on how to get started, please contact us at [email protected] or 01342 363277.