I am guessing you are getting very familiar with the word MTD if you own a business. If not, then this is the time to get used to it. From April 2022 all VAT-registered businesses irrespective of their turnover are bound to submit their VAT returns under Making Tax Digital (MTD) and use commercial software. The same is going to be applied to sole traders and private landlords soon.
What is MTD ITSA
From 6 April 2024, non-VAT registered sole traders and private landlords with an annual turnover of £10,000 or more are required to submit their numbers every 3 months like a VAT registered business followed by a final submission with year-end adjustments. This scheme is replacing the traditional self-assessment tax return. The final submission and tax payment deadline is still the same, 31 January following the tax year.
Purpose of MTD ITSA
The purpose of this scheme is to make the taxation system easier and reduce errors. It will also help the individual to see real-time information and reduce the risk of HMRC compliance checks which cost them a large accountancy bill. However, how welcoming the affected individuals will be when it rolls out is yet to be seen as it will bring some extra burden to them. They need to maintain and submit their records digitally and every three months while some struggle to prepare for it once a year. The good news is they can have a rough idea about how much tax they need to pay well in advance and plan accordingly.
How to submit the records
Unfortunately, HMRC will not be providing free software for this new scheme, so the sole traders and landlords need to get their own software. They can maintain their records in a spreadsheet but still, they need a bridging software which will pull the data from the spreadsheet and relay it to HMRC.
Supports available
HMRC is offering their customers to join in a pilot scheme from April this year so that they can get used to the new system. If you are interested to join the pilot, click here
if you require more information, please visit HMRC
Our advice is to get as much information as you can, contact your accountant well ahead of time and get familiarised with the system so that it does not come as a surprise.
We will be happy to assist you with more information and explanation in case you need any.