MTD for ITSA: start preparing your clients

Making tax digital (MTD) for income tax self-assessment (ITSA) may impact on many of your clients. Here’s what they need to know

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MTD for ITSA was originally expected to be implemented in April 2023, but in a written statement made to the House of Commons on 23 September 2021 it was announced that the roll-out of the programme will start from April 2024.

Although delayed, the move to digitalisation will happen.

Businesses, self-employed people and landlords will be required to:

  • operate MTD from 6 April 2024 in relation to their trading and property income chargeable to income tax and Class 4 NICs if their gross income from these income sources for a tax year exceeds £10,000 
  • keep their records digitally (for ITSA purposes only), provide digital quarterly updates and provide their ITSA return information to HMRC through MTD compatible software.

Business owners and landlords will no longer file an annual self-assessment tax return, unless exempt from MTD for ITSA. Where a taxpayer falls into the MTD ITSA regime, they will need to keep digital records and submit quarterly reports to HMRC as well as complete a year-end reconciliation and update process which broadly equates to the current self-assessment tax return filing.

The draft legislation suggests the £10,000 income threshold relates to the income for the accounting period two years before the period in question. In other words, for a period ended 5 April 2025, it would be the income for the period ended 5 April 2023.

It is worth noting that the £10,000 threshold is a turnover – not profit – threshold and where a taxpayer has more than one relevant source of income (for instance, an individual who has a trade and also a rental property) they are required to add the turnover from each of these sources together to determine whether or not the threshold has been breached.

The quarterly updates are due for submission one month after the end of the quarter. There will be no changes to the date of the payment of the income tax due.

Please note that, ALL VAT registered businesses regardless of turnover must transition to MTD for VAT by April 2022. Further guidance can be found here

ACCA will be bringing more resources together for practitioners to prepare and help their clients on the MTD journey including this recording of a webinar in which experts from Sage and an ACCA member in practice discuss what they believe are the most important areas in preparing for MTD for ITSA.

Further resources