Making Tax Digital for Income Tax Self-Assessment

HMRC have delayed the implementation of MTD for Income Tax Self Assessment by a further year.

You will now need to be ready to make your first quarterly uploads to HMRC from April 2024.

It may seem that we have plenty of time to achieve readiness, but experience has shown that getting from point A to point B can be challenging, especially if you add COVID issues into the mix.

Who will be affected?

If you are a sole traders or owner of a buy-to-let property with turnover from these combined sources of more than £10,000.

The quarterly reporting dates are fixed. The first tax year affected is 2024-25 and assuming that clients’ accounting period are coterminous that means:

1. The first report will be due in August 2024.
2. The second report will be due in November 2024.
3. Self-Assessment tax return for 2023-24 (the previous tax year) will be due by 31 January 2025.
4. The third report will be due in February 2025.
5. The fourth report will be due in May 2025.
6. The fifth and final year-end report will be January 2026.

HMRC are expecting that tax payers will want to match their accounting periods to 6 April or 31 March. Otherwise, the reporting needs will need to be time apportioned for MTD for ITSA.

If it is thought that changes to year-ends are appropriate, then this is going to change basis periods for tax and may bring in overlap profit calculations.

The MTD Reports need to be made to HMRC by 7 August, 7 November, 7 February and 7 May.

Other considerations

Partnerships will not be integrated with MTD for Income Tax until April 2025.

Tax payments

• Any tax liability will need to be paid by 31 January of the next year (as is currently the case).
• You will be allowed to voluntarily pay taxes as you go: the detail is still being decided and subject to change…..
• Eventually, it is possible you will be required to make four payments per year on account of tax.

Penalties

• Before the recent announced implementation delay (from April 2023 to April 2024) it was intended that there would be no late filing penalties for at least a year while the new system beds in. According to the new information released, implementation and late filing penalties will now both apply from April 2024.
• Penalties already apply for errors in returns or documents.
• Late payment interest already applies.
• HMRC say there may be in year nudges to tax payers

MTD for Corporation Tax is due to start in April 2026, which gives companies time to bed in the ITSA changes and get the systems and work flows correct before the next big change. So, it is imperative to start thinking about these issues now.

The first step

At An Accounting Gem we are digital experts and aim to support all sole traders and landlords that will be required to use the MTD, a filing platform to convert from manual to digital accounting software as soon as possible.

If you need to know more about MTD or any other accounting or tax issues please call us on 01473 744700