Making Tax Digital (MTD) visually on the horizon for the Income Tax Self Assessment (ITSA) period. On the 6thM April 2023, all unorganized businesses and self-employed persons earning more than £ 10,000 will have to register for MTD for ITSA.
HMRC has not yet released the final regulations, they are expected this October. So what do we know now, what is left to decide and how should you prepare?
MTD for ITSA: What we know now
From the current regulations of HMCR, we know something about what can be expected from MTD for ITSA.
- It doesn’t matter if your accounting period ends in 6M April 2023, all unorganized businesses must register.
- Turnover threshold is ট্যাক 10,000 in that tax year. You may have different income streams that are individually less than this, but if their combined total is more than £ 10,000 then you are in MTD for ITSA.
For example, আয় 8,000 rental income and £ 4,000 earnings from trading Both are below £ 10,000, but above the total 12,000 turnover threshold.
- You will report revenue and expenditure to HMRC quarterly. At the moment this deadline is 5M August, 5M November, 5M February and 5M May for all.
- Registration will be suspended for certain types of partnerships: limited partnerships, LLPs and partnerships that have a corporate partner.
- Possible discounts for: Non-resident companies, estates of deceased, trustees and trustees of registered pension schemes. There are also potential discounts for ‘digitally excluded’ people. But it has a strict definition which means you have absolutely no internet access. It does not account for the speed or quality of your connection.
- You will not receive a penalty notice for late filing unless you are late in submitting your four quarterly submissions.
- Your tax bill payment date is still the same – 31St. January, after the end of the tax year.
- You do not even have to submit a self assessment tax return.
- You must complete an End of Period Statement (EOPS) and write a final statement to file within the same 31st date.St. HMRC uses the following documents to calculate your tax bill.
- The business needs to keep a digital record.
Will it still be finalized by HMRC?
Indeed, the whole policy has not yet been fully finalized. But there are key elements to which everyone will be interested to know the answers, such as:
- It is possible that the idea of having a set of reporting deadlines – including the April registration date for all businesses – would be considered too irresistible for HMRC management. So there is a possibility that this will change.
- Will there be penalties for making mistakes during MTD for ITSA filing?
- How are expenditure categories defined in quarterly reporting forms? It is widely assumed that they will be similar to current self-assessment tax returns, but this has not been confirmed.
What should I do now, to prepare?
You can proceed by participating in HMRC’s pilot scheme and start your transfer to MTD for ITSA now.
If you meet all the criteria, you can sign up your business here.
If you leave it up to your accountant or tax agent, there are separate guidelines for them.
The first thing you need is compatible software If you already use an accountancy app, they can create MTD for ITSA capabilities as you read this. They will be able to tell you when it will be fully ready. You need it to keep a digital record and submit your quarterly report to HMRC.
HMRC publishes its own guidelines entitled ‘Find Software Compatible with Tax Digital Making for Income Tax’. It lists all HMRC approved software that currently maintains all required records and is compatible with HMRC’s filing portal. They will update it as it becomes more available.
Don’t worry you still have time
This is an additional administrative thing to do. But you still have plenty of time before the official 2023 deadline. You don’t have to panic. It is wise to work out the basics, such as which software package you are going to use.
HMRC’s complete making tax digital strategy aims to make tax administration more accurate and easier for us. Of course, there are stages of tooth extraction, where work needs to be done through technology and knowledge issues. But it can also be seen as a useful development for business owners.
No more bad annual bills that you, probably, didn’t expect very much. Regular reporting gives you the opportunity to be clear about how much tax you have to pay on that quarterly income. And put it aside in your business account. You will probably do it informally anyway. It gives you more detailed pictures.
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