Making Tax Digital – Income Tax for Self Assessment

Over the past few year HMRC have been rolling out their making tax digital initiative, transforming tax administration for many. The move to making tax digital is aimed to eliminate paper based processes and reduce errors. Moving to a digital process will help to make tax administration easier, more efficient and effective. Improved accuracy of digital records along with accounting software to submit information to HMRC digitally will reduce the amount of tax lost in the UK due to error. Although this has and will be a significant change for many, it is also a positive one, meaning that you will have far more control over your numbers than ever before.

 

Introduction MTD ITSA!

The implementation of Making Tax Digital for Income Tax Self Assessment (MTD ITSA) will become mandatory from April 2024 for individuals who submit a self-assessment with any self-employment and property gross income exceeding £10,000 in the tax year. It will include:

• 4 Quarterly submission to HMRC per business
• 1 Annual EOPS
• 1 Annual final declaration
• Filing via MTD software
• Digital record keeping

 

What does this mean?

From April 2024, businesses who qualify will need to keep and maintain digital records and submit these records to HMRC on a quarterly basis via a digital link or MTD compatible software. Quarterly submissions will then be followed by an End of period statement (EOPS) and a final declaration. This system will replace the self-assessment tax return we all know and love (or not!).

Quarterly submissions must be accurate and will contain a summary of the income and expenses incurred during the period. The deadlines for finalising tax calculations will not change nor will the payment deadlines currently in place.

The new system will help to provide a tax estimates based on the information submitted helping business owners to budget for their tax liabilities.

Deadlines for submitting quarterly updates are:

5^th August

5^th November

5^th February

5^th May

 

What are digital records?

A digital link is defined a transfer or exchange of data between the software that you use to keep your records. Digital record keeping is a way to record each business transaction and keep in a digital format. It helps to manage and track income and expenses in real time including details such as transaction amounts, dates and categories. In a move to eliminate manual and paper based records, digital records will use key functions such as automated bank feeds, software generate invoices and digitally stored expenses. l declaration replaces that replaces the current self assessment tax return.

Information kept digitally includes, but not limited to:

• Business name
• Principle address
• Vat numbers
• Record of accounting schemes
• Information relating to each taxable supply and expense including time of supply, value and rate of vat.

 

We have been working hard in the background to ensure that we are ready for one of the biggest changes to the tax system in over 20 years! We are digital ready and experienced in implementing accounting software into new businesses. We are here to help each individual make the move to MTD ITSA and will be guiding each and every client, old and new into the new ways of working.

From April 2023, we will be implementing a practice based year and offering this service out to clients including offers on digital software. If you are already a client of ours, we will be making contact with you over the next few months to discuss how this affects you and how we can help.

 

We will be updating this page to bring you as much information on these tax changes as possible so please keep a look out!

If you would like to know more then please get in touch via email on enquiries@cedarhouseaccounitng.co.uk