MTD for ITSA – where are we now?

TaxTalk - March 2023

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The government has further delayed the introduction of MTD for ITSA. The new timetable means it will be phased in from 6 April 2026. We consider the implications.

So who will be affected by this two-year postponement? Self-employed individuals and landlords with income exceeding £50,000 will need to join the MTD regime from 6 April 2026. Those with income between £30,000 and £50,000 will be required to join from 6 April 2027.

The government is currently reviewing whether smaller businesses with an income below £30,000 will be required to join at all.

We also now know MTD for ITSA will not be extended to general partnerships in 2025, as originally planned. But the government remains committed to introducing the regime to partnerships in the future.

HMRC has temporarily stopped adding any new entrants to its MTD for the ITSA pilot. No timeline has been released for when the pilot will reopen.

Where do we go from here?

We await further announcements on the pilot scheme and other communications about the regime. As soon as more information is available, we’ll provide an update. In the meantime, for further detail on what the government planned, please see our previous articles on MTD for ITSA here.

What did we already know?

  • Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is a new way of reporting property and self-employment income to HMRC. It will mean keeping digital records and sending Income Tax updates to HMRC quarterly.
  • This will give an estimated calculation of the tax owed, which should help you set aside enough money to pay your annual tax bill.
  • Payment dates will remain the same, with Income Tax due on 31 January and payments on account in January and July.
  • At the end of the year, you will confirm your profits on an end of period statement (EOPS). This will include any tax or accounting adjustments and will finalise the tax position of each of your property and self-employment businesses. The EOPS will be filed by the normal Self Assessment deadline of 31 January following the relevant tax year.
  • You will also need to submit a final declaration (which is the MTD equivalent of the current Self Assessment tax return), following your EOPS. This will bring together all business and personal information from the EOPS and information on non-MTD sources of income, in order to determine the final tax liability. The final declaration will also be filed by 31 January following the relevant tax year.
  • If you receive income from more than one source, it is the total turnover from all sources of self-employment and property that counts towards your qualifying income for the purposes of MTD for ITSA.
  • Until recently, MTD for ITSA was going to become mandatory from 6 April 2024 for individuals who had a turnover of more than £10,000 from their self-employment or property business. This is now under review (see above).
  • HMRC is currently running a limited pilot of MTD for ITSA, allowing qualifying individuals to record their income and expenses using MTD compliant software and send quarterly income tax updates to HMRC.

If you have any questions, or think you will be affected by MTD for ITSA and need guidance on how to prepare, please contact Vardeep Kular.