As a sole trader are you ready to tackle the upcoming making tax digital for income tax self assessment (MTD ITSA) changes with confidence and maybe even a smile? Let’s break it down together, so you can navigate this transition smoothly and keep your business thriving.
What’s the buzz about MTD ITSA?
Starting from April 2026, if your annual business income exceeds £50,000, you’ll need to keep digital records and send quarterly updates to HMRC using compatible software. For those earning over £30,000, this kicks in from April 2027. This initiative aims to streamline tax processes, making them more efficient and less prone to errors.
Does this include landlords?
Absolutely! If you’re a landlord with property income above the same thresholds, you’ll also need to comply with MTD ITSA.
So, if your combined income from self-employment and property exceeds £50,000, get ready for April 2026; if over £30,000, April 2027 is your date.
Going digital: What does it mean?
You’ll be required to maintain digital records of all income and expenses using MTD-compatible software. If you juggle both business and property income, keep separate digital records for each. This shift ensures accuracy and simplifies the tax submission process.
Quarterly updates: How often and when?
Prepare to submit a summary of your income and expenses every three months. The deadlines are confirmed as
- 7th August
- 7th November
- 7th February
- 7th May
Additionally, an annual final declaration will be due, summarising the year’s finances and confirming tax due.
Impact on accounting fees: What should you expect?
With increased reporting frequency, your accountant or bookkeeper may need to adjust their fees to accommodate the additional work. However, this also means more up-to-date financial insights for you, aiding better business decisions and reducing errors.
Penalties: What if you miss a deadline?
HMRC will implement a points-based system for late submissions. Accumulate too many points, and you’ll face financial penalties. Occasional slip-ups might be forgiven, but consistent lateness will hit your wallet.
Joint property ownership: How does it work?
If you own property jointly, each owner must maintain their own digital records and submit separate quarterly returns. Transparency and individual reporting are key here.
Preparing for the transition: Steps to take:
- Understand the requirements and timelines of MTD ITSA.
- Invest in MTD-approved accounting software that suits your business needs.
- Engage with accountants or bookkeepers familiar with MTD ITSA to guide you.
- Keep abreast of any updates or changes from HMRC regarding MTD ITSA.
Embracing MTD ITSA is a step toward modernising your business processes, leading to greater efficiency and financial clarity. Start preparing now to ensure a seamless transition. If your still unsure, consult with the experts!
If you would like some help with MTD ITSA please call us on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk. You can also book a free 20-minute call with Yarka – https://calendly.com/yarka-ssa/20min
