How to Price Profitably in Your Business
December 13, 2022
We get asked questions about MTD for ITSA. People want to know how MTD for ITSA affects them and they’re trying to figure out how to prepare ahead.
Chances are, you probably have these same types of questions. And you’ve probably even spent some time on blogs, forums and around the web, trying to get answers. Problem is, you keep getting complex or even conflicting answers, right?
So you’re left to sort through the wheat and the chaff.
That’s why we compiled this list of frequently asked questions.
We wanted to make sure you got the right information from a practising qualified accountant. Read on…
MTD for ITSA means Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA). It is a new way for self-employed business owners and landlords to report earnings and pay income tax.
It will replace the current annual self assessment tax returns.
Self-employed business owners and landlords need to keep and maintain digital records and use MTD compatible software to send and track updates to HMRC.
A Quarterly Summary Update of the business income and expenditure is required. At the end of the fourth quarter, an End Of Period Statement (EOPS) is to be made to finalise each business income source. A Final Declaration is required per individual to include all other sources of taxable income such as investment income. This is due by 31 January following the end of the relevant tax year.
In summary, the following are required:
The standard quarterly periods are: 6 April to 5 July, 6 July to 5 October, 6 October to 5 January, 6 January to 5 April.
At a later date, there will be an option to use calendar quarterly periods i.e. 1 April to 30 June, 1 July to 30 September, 1 October to 31 December, 1 January to 31 March.
The deadlines for submitting the quarterly updates are the same regardless of whether standard quarterly periods or calendar quarterly periods are used. The deadlines are 5 August, 5 November, 5 February and 5 May.
Self-employed individuals and landlords with a total business or property income above £10,000 per year.
MTD for ITSA will come into effect from 6 April 2024 for all self-employed individuals and property landlords in business prior to 6 April 2023. For self-employed individuals and property landlords starting from 6 April 2023 onwards, the digital start date will be in teh third tax year of trade.
The £10,000 threshold is based on the total business or property income in the relevant tax year 6 April 2022 to 5 April 2023.
There are two categories of exemption:
At last, you finally know the FACTS about MTD for ITSA. That means that you can now prepare ahead more confidently if you are in scope, because you’re armed with the knowledge you need.
MTD for ITSA is a big change as it impacts small business owners and property landlords who may not currently be keeping digital records. At Clarified Accounting, we can support you with simple digital record keeping solutions which are fully compliant with the MTD requirements. Don’t wait till April 2024, contact us today.
You can rely on our resources, expertise, knowledge, and experience to grow your business. We will do our best to make accounting processes hassle-free for you.
01233239307
info@clarifiedaccounting.co.uk
Ashford, Kent.
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