Hurrah! No more self-assessment tax returns...

Old-style tax returns are set to disappear, writes ANEES HUSSAIN of Page Kirk's tax department. Or maybe it's not quite that simple...

Making Tax Digital (MTD) is part of the Government's ambition to become one of the most digitally advanced tax authorities in the world, and when MTD was first announced, one particular headline caught my eye: 'Making tax easier: the end of the tax return'. That was written in a document published in 2015. Fast forward to 2022 and I now realise that headline was slightly misleading.

So, what does MTD actually mean for self-assessment taxpayers? Well, from April 2024, businesses and landlords with gross income from self-employment and/or rent of £10,000 or more will be required to keep digital records and make submissions of data to HMRC electronically.

Ten things you need to know about MTD ITSA

1. Business records must be kept electronically. Spreadsheets can be used, but for most businesses online accounting software and Apps will be the most appropriate way of satisfying this condition.
2. Sole traders and landlords must comply with MTD ITSA from April 2024. Partnerships do not need to comply until April 2025, and LLPs and partnerships with corporate partners will need to comply from a date in the future that is yet to be confirmed.
3. Taxpayers with combined business income and rental income of less than £10,000 in tax year 2022/23 will not be required to comply with MTD.
4. New businesses or existing businesses with turnover that exceeds £10,000 for the first time will be required to comply with MTD from the 6 April in year three. For example, a new business, which commences trading in April 2024 and first exceeds the turnover test in the 12 months to 5 April 2025, will be required to comply from 6 April 2026.
5. An exemption applies for the digitally excluded, which covers those that do not use computers for religious reasons and those that are unable to comply because of location, age, or disability. Also exempt are trustees, and executors/administrators. It is anticipated that very few will be exempt.
6. Each business or rental type will make separate submissions of data, so if a sole trader also receives rental income from a residential property and has income from a furnished holiday let, he/she will be required to make three submissions of data under MTD ITSA. If that sole trader is registered for VAT, he/she will also be required to make a submission of data under MTD VAT.
7. Quarterly submissions of data to HMRC will be required and the data must be submitted electronically. The submissions are likely to include designatory information i.e., national insurance number, financial data including sales income and expenses, and – in the case of landlords – details of the property or properties being let.
8. The standard quarterly periods fall on the normal quarter dates (30 June, 30 September, 31 December, 31 March). The due date for the quarterly submissions is 5 August, 5 November, 5 February and 5 May.
9. A fifth submission will be required summarising the businesses financial data and taxable profit after making accounting and tax adjustments. This submission will also include details of other, non-trading or rental income, including – for example – taxable savings or investment income, employment or pension income. Finally, a sixth submission will be required to confirm all data submitted is correct and final. These submissions will be due by 31 January following the end of the tax year.
10. Tax payment due dates will not change for the time being.

What you should be doing now to prepare for MTD ITSA

If your business is using accounting software to record its transactions, you should check that it is MTD compatible. If you are not using software, you should be speaking with your accountant and considering which software is most appropriate for you. There are benefits to using cloud accounting software, not least that it is MTD compatible, but also that it can allow your accountant to provide you with real-time tax estimates and tax planning tips.

If you are a small business or landlord with income of less then £150,000, you should consider using the 'cash basis' of accounting - which is a simpler way to account for income and expenses and could make it easier to compile the data for submission under MTD ITSA.

If you are not required to comply with MTD, you will continue to file your self-assessment tax return as you do now – nothing will change. Hence, it is not strictly speaking the 'end of the tax return', well not for some tax payers anyway!

Top Tip

Get help and advice from your accountant in choosing the most appropriate cloud accounting software and apps and start using them as soon as possible. Page Kirk has an entire team dedicated to cloud accounting, who can provide this advice, along with training and support.

Why choose Page Kirk?

Page Kirk are Platinum Certified QuickBooks ProAdvisors and we believe in taking advantage of advances in technology. Using software to speed up manual accounting processes frees our time to help ambitious business owners build their business and their wealth – for example, by keeping more of what they earn.

To find out how we can help you, simply contact us on 0115 955 5500 or email enquiries@pagekirk.co.uk.