MTD ITSA comes into force from 5 April 2024, for taxpayers with rental and/or trading income in excess of £10,000. Although the legislation supporting the new system has yet to be finalised, HMRC has started voluntary enrolment to beta test the system and processes. Unfortunately, the recent tightening of the eligibility for the pilot scheme has seen the number of participants fall to just 9, with all but very simple businesses excluded, along with any who received COVID-19 grants.
HMRC’s Office for Tax Simplification has billed the new regime as advantageous due to removing the need for Self-Assessment Tax Returns for many taxpayers. However, recent Q&A sessions with HMRC representatives have revealed that Returns will still need to be submitted by any taxpayers with income not captured by MTD ITSA, even where that income is dealt with under PAYE. For most taxpayers, this, therefore, means 6 filings for each tax year: 4 quarterly MTD submissions, 1 end-of-year MTD submission, and a Self-Assessment Return. In addition, separate MTD submissions will need to be made for each trading and/or rental business; for example, a taxpayer with self-employment, a 100% owned rental property, and a 50% owned rental property, would need to make 3 separate submissions for each quarter and year-end.
It is important for taxpayers to note that MTD ITSA will start to apply from the tax year 2024/25; the first MTD ITSA reporting deadline will be 5 August 2024. This is a full 8 months before most taxpayers would usually start collecting their 2024/25 records together for reporting, and 17 months before the normal Self-Assessment filing deadline. Therefore, although it seems a long way off, taxpayers should start to think about transitioning their records to a compliant digital format in preparation.
Records must be kept digitally; although a basic spreadsheet is deemed to be compliant, bridging software will be needed to submit the data to HMRC’s filing interface. HMRC will not be providing any in-house software and so this must be sourced by the taxpayer from a 3rd party.
We are keeping a close eye on the MTD ITSA developments as they happen; we will be offering compliance packages appropriate to your needs, including bridging software solutions and transition assistance, in the near future. If you would like to discuss how MTD ITSA will affect your business, please contact our Private Client team on 01223 810 100, today.
