A new policy paper has been released by HM Revenue and Customs (HMRC) on Making Tax Digital for Income Tax Self Assessment for sole traders and landlords.
The new tax information and impact note supersedes the previous one and incorporates the changes in scope and timelines announced in December 2022, and other policy amendments and improvements made in the Autumn Statement 2023.
Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) revolves around requiring businesses and landlords to keep digital records and update HMRC each quarter using compatible software.
The policy paper outlines that MTD for ITSA will be introduced for sole traders and landlords in two phases:
- For those with qualifying income over £50,000, from April 2026.
- For those with qualifying income over £30,000, from April 2027.
The government plans to introduce MTD for ITSA for partnerships at a future time.
The government feel that MTD for ITSA will reduce tax errors, but if the introduction of MTD for ITSA affects you then it may mean making adjustments to the way you currently handle your accounting records. It may also mean keeping more up-to-date with bookkeeping because of the requirement to submit quarterly returns.
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With just 10 weeks or so to go until the new tax year, many businesses are preparing for the changes that Making Tax Digital (MTD) will bring. From April, sole traders and landlords with an income of over £50,000 will need to submit quarterly updates to HMRC.
If you are new to being self-employed or being a landlord, Self Assessment can feel like one of those jobs you know you should understand better, but never quite get around to.