MTD for ITSA (Making Tax Digital for Income Tax Self Assessment), also referred to as ‘MTD for Income Tax’, will replace the current system in place for Self Assessment tax returns. This is the second stage of Making Tax Digital initiative, with more stages to be rolled out gradually over the coming years.

What is changing for MTD for ITSA?

The most substantial change to take note of is that those affected will need to submit four quarterly updates of their businesses expenses and income, as well as an EOPS (end of period statement) and a final declaration. This is much more frequent than the current annual Self Assessment tax return to HMRC.

Who will MTD for ITSA affect?

Primarily MTD for ITSA will affect landlords and self-employed business owners with more than £10,000 annual business and/or property income.

The changes will come into effect in:

• April 2024 for landlords and self-employed business owners; and
• April 2025 for individual partnerships (other partnership types such as limited liability partnerships (LLPs) and partnerships with corporate partners will join at a future date).

What do I need to do under the new rules?

For self-employed business owners and landlords affected by MTD for ITSA, you will need to:

Keep digital records of your business income and expenses.

It’s advisable to start keeping digital records of all business income and expenses, including all income from property or self-employment. Doing this now will mean you have plenty of time to prepare for the deadlines mentioned above, with no last-minute scrambling.

You can keep digital records using cloud accounting software which will make this much easier for you to get your tax right first time and reduce overpayment and penalties. It also gives you a broader overview of your business accounts, so you have more control. Remember to make sure that any software you use is MTD-compatible!

Send quarterly updates of income and expenses from your business or property to HMRC.

After signing up to MTD for ITSA, you’ll be required to digitally send an income and expenses summary to HMRC quarterly.

The deadlines for these quarterly updates are going to be the same for all those who need follow the new MTD for ITSA rules. On 6th April from the start of the tax year mentioned above (depending on your business structure/type), the deadlines are:

• 5th August
• 5th November
• 5th February
• 5th May

Submit an EOPS for each income source along with a final declaration to confirm your business income.

At the end of the tax year, you’ll need to Confirm your business income at the end of the tax year by completing an EOPS for each income source with a final declaration. This is what essentially replaces the current Self Assessment tax return. You’ll have to submit these and pay the tax you ow by 31st January of the following tax year, as with the current Self Assessment system.

This process allows you to make any adjustments or add any details about personal income or reliefs, as well as confirm that the updates you’ve sent are correct.

How do I sign up to MTD for ITSA?

There is currently a pilot MTD for ITSA scheme that will be gradually expanded in the 2022-23 tax year in preparation for larger-scale testing in 2023-24 tax year. Landlords and certain businesses can voluntarily sign up now, but there is a separate process to follow if you already use a bookkeeper or accountant.

Learn more about MTD for ITSA

You can read our blog for more information regarding the MTD for ITSA initiative and any upcoming changes. We also gather MTD news on our website, and you can always get in touch for advice on MTD for ITSA, how it affects your business and how we can help.