First things first, what is Making Tax Digital for Self-Assessment( MTD for ITSA)? Put simply it is the requirement to keep digital business records.

Essentially keeping a digital analysis of income and expenditure in a format capable of meeting the reporting requirements. The actual receipts themselves do not need to be stored digitally, although if they are scanned it can save space and make it easier to access them. Sole traders are required to keep business records for five years from 31 January following end of the tax year they relate to. Ever been tempted to bin the records early? Failing to keep records for the statutory period can incur a penalty of up to £3,000 for each tax year.

Most will already be recording transactions digitally and may only require minimal adjustments to comply with MTD for ITSA. There will still be some who prefer to add up the receipts and scribble the numbers on a sheet of paper ready for the accountant to prepare a Tax Return. Unfortunately this will not be an option once MTD for ITSA comes in (unless you are exempt from MTD for ITSA, read on to learn more).

The biggest change affecting all will be the requirement to file quarterly reports to HM Revenue & Customs rather than just the annual Tax Return. In addition an end of year summary will also be required to finalize claims, elections and other tax matters. What if you have multiple sources of income? Then multiple reports will be required each quarter. For example a sole trader who also receives rental income would have two reports to submit every quarter.

Each quarterly reporting period will have it's own deadline and penalties for missing deadlines will apply.

Why might it be a good time to consider a bookkeeper? The simple answer is the added burden will be minimized. Often people like to set aside a day or two per year to get their records in order (typically over the Christmas period when there is little work to do). If we're honest it is a job that get's put off until the deadline is looming. Now this task will be 4 times a year with a much shorter deadline. With the increased potential to miss filing deadlines. Just passing receipts and records to a bookkeeper to sort, evaluate, classify and record should be much less daunting and save considerable time.

WB Accountant can help you meet your MTD for ITSA requirements and minimize the impact this will have on your time. We can categorize and record your expenses from receipts and business bank statements. The receipts will be scanned and at the end of each quarter you would be presented with a digital package of records and receipts. Not only would this meet your MTD for ITSA requirements but also satisfy the requirement to keep supporting business records for a six year period without having boxes of receipts taking up space. Remember, failing to keep records can incur a penalty of up to £3,000 for each failure.  

When will these changes come in? Self-employed traders and landlords will be required to comply with MTD for ITSA from 6th April 2024, with a filing deadline of 5th August 2024.

Quarterly update 1:         Filing Deadline

6 April to 5 July                  5 August

Quarterly update 2:

6 July to 5 October           5 November

Quarterly update 3:        

6 October to 5 January   5 February

Quarterly update 4:        

6 January to 5 April           5 May

An exemption currently applies for individuals who's business turnover is below £10,000 per year. This applies to all business income so should be looked at carefully before determining if the criteria is met. Further exclusions can apply but again these should be carefully reviewed as the majority will not be excluded.

Partnerships will get an extra year having to comply from April 2025.

In addition to saving you time, using a bookkeeper will ensure quality records are kept. These will enhance the accuracy of tax reporting reducing the risk of claiming a deduction for expenses which do not qualify for tax purposes whilst ensuring legitimate expenditure is not missed and items are classified correctly. If you would like to discuss how WB Accountant can assist you plan for and meet your MTD for ITSA requirements please give us a call or send a message.

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