Will Making Tax Digital for Income Tax Self Assessment Affect Me?

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is a new way for self-employed business owners and landlords to report earnings and pay Income Tax from April 2024. 

 

Sole traders, partnerships and landlords with a total business or property income above £10,000 per year will have to comply with MTD for ITSA from their first accounting period starting after that date. 

 

From 6th April 2024, all affected business owners and landlords will need to: 

• sign up for MTD for ITSA via HMRC’s website 

• keep digital business records (this means no more paper records) 

• use MTD-compatible accounting software such as FreeAgent, Xero, QuickBooks etc 

• send quarterly business income and expenses updates to HMRC through the software 

• finalise the business’s income in a declaration which confirms that the updates sent are correct, and make any accounting adjustments 

• submit this final declaration to HMRC. This will replace the annual Self Assessment tax return. 

 

Instead of sending a Self Assessment tax return to HMRC once a year, business owners and landlords will have to submit quarterly summary updates of their income and expenditure, followed by a final declaration at the end of the year. 

 

Quarterly summaries will include income and expenses for each self-employment and property business. The timing of the quarterly updates is determined by the business’s accounting period. If the accounting period matches the tax year, the four quarters will be: 

• 6th April to 5th July 

• 6th July to 5th October 

• 6th October to 5th January 

• 6th January to 5th April 

 

Each quarterly update will need to be submitted by the 5th of the following month. The quarterly updates will give business owners and landlords a year-to-date calculation of how much tax they owe, based on the information provided in the summary.  

 

Business owners and landlords will also need to use their accounting software to finalise their overall tax position at the end of the year. They will have to add any relevant details about personal income and tax reliefs and include an End of Period Statement (EOPS). The final declaration will replace the Self Assessment tax return but the deadline for submission remains the same e.g. 31st January.