Making Tax Digital for Income Tax Self-Assessment or MTD ITSA will apply to you as an individual from April 2024 if your total gross income from self-employment and property exceeds £10,000 in a tax year.

The draft legislation for MTD ITSA has been published and it confirms that those with turnover under the VAT threshold of £85,000 will be asked to submit just two figures to HMRC under the schemes new quarterly update requirements and End Of Period Statement – total income and expenses (without splitting into categories).

For those above the VAT threshold, the publication also makes it clear there are five different types of quarterly updates, depending on the type of business a taxpayer is conducting and details the information that will be required:

  1. Businesses with trade profits
  2. Businesses with property income (not UK or European Economic Area (EEA) furnished holiday lets (FHL))
  3. Overseas property (not EEA FHL)
  4. FHL in the UK
  5. FHL in the EEA

The draft document confirms that the MTD ITSA end-of-period statements (EOPS) will also follow the five categories above.

Stuart Hulland, Partner at Bates Weston comments:

“The simplification for smaller businesses is welcome, although it is only a minor reduction in the major administrative burden the whole scheme creates.

The bigger picture remains unclear on MTD Income Tax Self-Assessment. We share the concerns of many commentators within the accountancy profession, that the limited MTD pilot will not allow sufficient testing of the proposed quarterly reporting and EOPS system to implement any lessons learned before the widespread roll out in April 2024. It may seem like there is plenty of time, however, those on the pilot now will make their last quarter report for 2022/23 by May 2023, submitting their EOPS by January 2024.

To make sure the accountancy profession is able to prepare and guide clients through the MTD Income Tax process, we need to be sure that MTD ITSA and its associated software works and that the timeline is clear.

We are doing what we can to prepare our clients, encouraging them to make the move to digital record keeping, but further guidance from HMRC is necessary to ensure taxpayers will be ready for the mandated date.“