Introduction:
Making Tax Digital (MTD) is a UK government initiative aimed at transforming the tax system. As part of this initiative, Income Tax Self-Assessment (ITSA) will become digital from April 2026. In this blog, we’ll explore what MTD for ITSA means for you, the benefits, and how to prepare.
What is MTD for ITSA?
MTD for ITSA requires businesses and landlords with an annual business income of over £50,000, from April 2026 and over £30,000 from April 2027 to:
- Keep digital records of their business income and expenses.
2. Submit quarterly updates to HMRC using MTD-compatible software.
3. Make an End of Period Statement (EOPS) and a Final Declaration.Benefits of MTD for ITSA:
1. Improved accuracy: Digital records reduce errors and ensure accuracy.
2. Real-time visibility: Quarterly updates provide a clearer picture of your tax position.
3. Reduced administrative burden: Automated processes save time and effort.
4. Better financial planning: Regular updates enable more informed financial decisions.How to Prepare for MTD for ITSA:
1. Choose MTD-compatible software: Select a software that meets HMRC’s requirements.
2. Set up digital records: Start keeping digital records of your business income and expenses.
3. Understand the quarterly update process: Familiarize yourself with the quarterly update process.
4. Seek professional advice: Consult with a tax professional or accountant to ensure a smooth transition.Conclusion:
MTD for ITSA is a significant change, but with the right preparation, you can navigate this transition smoothly. By embracing digital record-keeping and quarterly updates, you’ll enjoy improved accuracy, real-time visibility, and reduced administrative burdens. Don’t wait – start preparing now to ensure a seamless transition to MTD for ITSA.
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