HMRC has taken a new initiative for Making Tax Digital for Income Tax Self Assessment (MTD for ITSA). This HMRC Self Assessment tax applies if you have a gross annual income exceeding £10,000.
Making Tax Digital for Income Tax is HMRC's wider vision part. HMRC hopes to bring their tax system to the modern, global, and digital economy. Hence, if you are a business, self-employed, or landlord, you must prepare and test MTD voluntarily before its launch in April 2024.
HMRC is digitising their taxation system and making getting your taxation so more effortless. It will tremendously help and ease taxpayers, reduce the error margin, and close current tax gaps.
HMRC Self Assessment is transforming with digitisation. People now rely more on digital tools to run their businesses in the current era. Cloud accounting software solutions properly assist your smooth transition to the new HMRC MTD system.
What is MTD for ITSA?
MTD for ITSA is a government plan for digitising the UK tax system. HMRC will implement MTD for ITSA in April 2024, changing how businesses, landlords and self-employed individuals grossly earning above £10,000 will submit their income tax returns.
Also, MTD for HMRC Self Assessment tax will replace the current annual self-assessment. Businesses, landlords and self-employed individuals will send the following information to comply with HMRC MTD for ITSA rules:
- Quarterly updates
- End of Period Statement (EOPS)
- Final Declaration by MTD-compatible software (Sage, Xero etc.)
When will the HMRC Self Assessment tax go digital?
Self Assessment is going digital on April 6, 2024. It means all self-employed individuals, businesses, and landlords with gross earnings over £10,000 will need compatible software by this date.
The Sage software is HMRC recognised and covers everything about MTD, it's readiness and deadlines. You can benefit from our Sage or Xero software practical training courses. These courses fully cover self-employed individuals, businesses, and landlords' HMRC MTD compliance.
How will Self Assessment tax work?
HMRC has delayed MTD for ITSA until April 2024, confirmed in the Ministerial Statement in September 2021. Now HMRC would introduce and implement MTD for ITSA:
- For self-employed individuals, landlords and businesses from April 6, 2024
- For general partnerships after April 2025, HMRC will set the date later.
Currently, self-employed people and landlords submit one yearly Self Assessment tax return using the HMRC online portal, software, or postal mail. Usually, accountants or bookkeepers do this if they have.
You must keep return, digital or paper records throughout the tax year to pull together the figures. The paper-based (postal) file submission deadline is October 31, and you can file online by January 31 through the HMRC portal or software.
Concerning MTD, you must know that HMRC will no longer accept Self Assessment payment returns submissions through the online HMRC portal or the paper (mail) filing system.
For digital records keeping and submitting updates to HMRC, you must utilise MTD-compatible software like Xero or Sage for MTD for ITSA. These softwares also make your accounting and bookkeeping faster and easier. Also, they have Cloud integration.
KBM provides an opportunity to learn MTD through its Sage training with a work experience programme. These training programmes benefit employers, upskilling their staff for HMRC MTD for ITSA.
What are the HMRC Quarterly updates?
You must keep your up-to-date digital records. Your quarterly updates will include your income and expenditure details for each quarter. These updates quickly pull together in your cloud-based accounting software like Sage or Xero.
Whar are HMRC MTD End of Period Statement (EOPS)?
End of Period Statement (EOPS) adjusts your final accounting and relief claims. HMRC-recognised software like Xero can pull your EOPS swiftly. On the other hand, EOPS confirms the complete and accurate information submission.
What is the Final Declaration for HMRC MTD for ITSA?
The Final Declaration is HMRC's opportunity to disclose any additional income sources like investment and savings in your Final Declaration. Also, the Final Declaration allows you to submit your relief claims.
Digital record-keeping significance
Keeping digital accounting records is a pleasant breeze with accounting software like Xero, which integrates with the Cloud. Even you can reconcile your transactions from your phone using the Xero app.
Also, the Xero software app allows you to connect your bank account and automatically import transactions. At the same time, you can see where your finances stand at a glance.
What is MTD for ITSA changes benefit?
The old HMRC Self Assessment system reports your whole tax year's income and expenditure in one return and manually calculates your figures using Excel and paper records.
HMRC MTD helps you focus more on your business by giving less time to administration. The key features include the following:
- Initial MTD-compatible software learning curve quarterly updates without taking a longer compilation time.
- Allow submitting a quarter's information worth, automatically compiled by your software like Sage or Xero. It keeps your digital records so you can directly submit them to HMRC.
- Quarterly updates provide your finances with a near-real-time view.
- HMRC sends you the tax estimation you owe, helping to prepare your tax bill on time.
- MTD for the new HMRC VAT system makes preparing and submitting your HMRC Self Assessment tax return easier.
What are the other benefits of Cloud Accounting software?
Regarding accounting software, the benefits are beyond MTD. Using Sage and Xero software solutions provides real-time insights into the business's financial health. Invoicing and receipt-capturing features help manage various financial tasks.
You can thoroughly learn various accounting software solutions at KBM. Our dedicated Pro Advisors certified Cloud accounting expert team helps you learn Sage, QuickBooks, Xero and other solutions. Also, you can access our HMRC compliance services for individuals and all sizes of businesses.
