Making Tax Digital for Income Tax Self Assessment Changes
MTD for ITSA – Introduction
Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) is a UK government initiative aimed at digitising the tax filing process for self-employed individuals and landlords. This system requires taxpayers to keep digital records and use software to submit their tax returns and updates to HM Revenue and Customs (HMRC), aiming to make tax administration more efficient, effective, and easier for taxpayers to ensure their tax is correct.
Initially introduced for VAT, its extension to ITSA represents a significant step towards a fully digital tax system, aiming to streamline tax reporting for millions of businesses and self-employed individuals across the UK.
HMRC Announce Regulation Amendments
The recent amendments to the MTD for ITSA regulations introduce several key changes aimed at simplifying compliance and enhancing the system’s usability for taxpayers and accountants. These adjustments reflect feedback from stakeholders and are designed to ensure a smoother transition to digital tax reporting. The amendments formally change the start date from April 2024 to April 2026 (as announced in 2022), as well as that the deadline for the quarterly submissions will be the seventh of the month, aligning with the current VAT submission deadline date.
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ICAEW – Significant Concerns Persist
Despite the amendments being aimed at easing the transition to Making Tax Digital for ITSA, the ICAEW has significant concerns about the project rollout. HMRC has so far refused to scrap mandating MTD for businesses and landlords with yearly turnover below £30,000, stating that it remains ‘under review’. The confusion and uncertainty around the administrative and financial burden compliance will place upon these individuals remains unaddressed. There is also significant doubt as to whether a viable pilot scheme will be operational by 2025/26, given that the project has already been pushed back two years. Other potential problems include:
- HMRC’s staffing levels being unable to match the level of administrative support needed when the project launches
- Insufficient compatible software options, especially the free software HMRC currently commits to offering
- The late submission penalty and how it will work in practice.
These issues underscore the need for clear guidance and support from HMRC, as well as robust, affordable software solutions that can seamlessly integrate with the new system requirements.
At Jack Ross Chartered Accountants, we have lots of expertise in guiding clients through the complexities of MTD for ITSA compliance. Our accounting services are designed to ensure seamless adaptation to the new digital requirements. Using state-of-the-art Xero cloud accounting software, all of your financial information can be digitised and MTD-compliant in a simple, no-fuss process.
Our team has assisted hundreds of businesses in maintaining accurate financial records, using the right digital tools, and optimising tax planning strategies. We stay up-to-date with the latest HMRC updates and changes to the regulations, giving you peace of mind and allowing you to focus on running your business. Use the contact form below and a member of our team will be in touch to schedule a free 15 minute consultation.