MTD ITSA – what to do now to prepare

TaxTalk - November 2022

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If you think you may be affected by MTD for Income Tax Self-Assessment, find out about the process for registering and the deadlines. Plus complete our survey at the end of the article to help us provide the best service.

We are gradually discovering more details of the new MTD regime for Income Tax Self-Assessment, due to come into force in April 2024. So, it’s important to know if you will be affected, and what you can do now to prepare.

Who is affected?

If you’ve been following our recent articles, you should already have an idea as to whether the new regime applies to you. If you’ve missed any of these, you can catch up using the link at the bottom of this article. If you are a landlord or a self-employed sole trader, then it’s worth a few minutes to get up to speed.

What can I do now?

HMRC has indicated that as a taxpayer registering for MTD you will need a Government Gateway account and must be registered for Self-Assessment. If you don’t have a Government Gateway account, such as a personal tax account, you should consider setting this up now.  Make sure, too, that you are registered for Self-Assessment.

Creating a Government Gateway account

The setting up process asks you to provide an email address and create a password.

You will also need to prove your identity.  This is done digitally by providing your National Insurance number and two of the following:

  • A valid UK passport
  • A UK driving licence issued by the DVLA (or DVA in Northern Ireland)
  • A payslip from the last three months or a P60 from your employer for the last tax year
  • Details of a tax credit claim, if you made one
  • Details from a Self-Assessment tax return, if you made one
  • Information held on your credit records, if applicable (such as loans, credit cards or mortgages)

See the link at the bottom of this article for more details on the process.

Registering for Self-Assessment

If you are self-employed and earned more than £1,000 (before subtracting anything on which you can claim tax relief) or received more than £2,500 in a tax year from renting out property, you need to complete a Self-Assessment tax return. 

If your income from any untaxed sources, such as property rental, is between £1,000 and £2,500 you may not need to do a tax return and instead can notify HMRC through your personal tax account or call HMRC.

If you haven’t submitted a Self-Assessment tax return before, you have until 5 October after the end of the tax year to notify HMRC that you have an obligation to file one for that tax year. HMRC has an online service to check if this applies to you.

What happens next?

You must submit your Self-Assessment tax return for 2022/23 by 31 January 2024.  HMRC will review it and check if your qualifying income is more than £10,000.  If it is, HMRC will write to you and confirm that you must meet the Making Tax Digital for Income Tax (MTD for ITSA) requirements by 6 April 2024. If you have an agent, they can meet the requirements on your behalf.

You or your agent must find software that is compatible with, and must then register for, MTD for ITSA.

If you become self-employed or a landlord after 6 April 2023 you do not meet the MTD for ITSA requirements until you’ve submitted your first tax return reporting such income.  HMRC will notify you once your qualifying income is more than £10,000 and tell you when you must start meeting the requirements.

You’ll have the option to voluntarily sign up for the system at an earlier date. HMRC is also running pilots of the scheme before its formal start date of April 2024.  We will be providing details in a later article on how you can join the pilot, if you are interested.

What are your thoughts?

Our MTD for ITSA team is launching a survey to understand the level of awareness among taxpayers, and the extent to which they will look to agents for help and support. We would appreciate your taking a couple of minutes to respond, so we can tailor our service to meet your needs. If you would prefer to speak to one of the team, please complete your details and we will call you.

If you would like advice on any of the above, please contact Karen Ozen