Although the government has delayed its plans for the introduction of Making Tax Digital for ITSA (Income Tax Self-Assessment), Stuart Hulland, partner at Bates Weston, urges self employed and landlords to make the move to digital record keeping sooner rather than later.

The Government has announced that MTD for Income Tax Self-Assessment (MTD ITSA) will now be introduced in the tax year beginning April 2024, not April 2023. This date is extended to April 2025 for General Partnerships. HMRC has yet to confirm the date by which other types of partnership will be required to join the scheme.

The planned new points-based system for late filing and late payment of ITSA, announced in March of this year, will also be delayed until April 2024 and 2025 tax years respectively.

The explanatory memorandum which accompanies the Income Tax (Digital Requirements) Regulations 2021 confirms that that for people with profits from a trade, profession or vocation or profits from a property business, which are chargeable to income tax and exceed £10,000 must follow the MTD ITSA rules from 6 April 2024.

MTD ITSA regulations require that businesses or landlords must keep and preserve their tax records electronically and submit reports to HMRC using approved software. Quarterly updates and an end of period statement (EOPS), finalising the overall tax position at the end of the tax year, will be required. The quarter period end dates are 5 July, 5 October, 5 January and 5 April, with submission deadlines on the 5th of the month following the period end. The quarterly information required will include amounts, dates and categories of transactions for income and expenses with allowances, adjustments and finalised business income sources in the EOPS. Quarterly returns and EOPS updates are required for each source of business income. For example, if an individual has a self-employment business and a property business, two EOPS will be required. The EOPS is due by 31 January following the end of the accounting period.

Stuart Hulland, Partner at Bates Weston comments:

“Although the introduction of MTD ITSA has been delayed until the tax year beginning April 2024, we are encouraging our self-employed and landlord clients to prepare for digital record keeping now. Not because HMRC says they should, but because keeping records, in real time digitally and sharing them with your accountant, lets us give you real time advice. We can monitor your business, help with cashflow and plan for payment of tax liabilities, spotting and correcting issues or highlighting opportunities “in year” rather than trying to mitigate issues at the year end.”

“Digital record keeping is an irreversible trend. It can bring great benefits to businesses, allowing them to see what is going on in their businesses in real time, letting their professional advisors help to drive efficiencies, seize opportunities and plan ahead. Whilst we welcome the delay, to give smaller self-employed businesses the chance to find their feet post pandemic, we continue to urge our clients to get on board with digital record keeping as soon as possible.

If you would like our help in transitioning to digital record keeping, please do get in touch.