Roadmap for Making Tax Digital for Income Tax Self-Assessment changes
In late December HMRC announced a major change to the Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) roadmap, delaying the introduction for a further two years to 2026, and introducing a staggered approach for those impacted.
So, what is the new timeline and who is impacted? Previously, all sole-traders and landlords with a combined turnover of over £10,000 were to keep their records digitally and submit quarterly summaries of income and expenses to HMRC through compliant software from April 2024.
However, following HMRC’s announcement, it will now have the following staggered approach.
Phase 1 - From April 2026, MTD for ITSA will be mandated for businesses, self-employed individuals and landlords with income over £50,000.
Phase 2 - From April 2027, all those with income over £30,000 will be mandated.
It was also announced that partnerships will not be required to comply until a later date, but that date is still to be confirmed.
The staggered approach by HMRC is a welcome announcement. The phasing will help to lessen the risk of HMRC systems and support lines becoming overwhelmed. Those in the initial wave may already be familiar with digital record keeping and submissions for VAT purposes, and realising the additional benefits this can bring.
However, those businesses and individuals that fall into the second wave may not have made the switch to digital cloud accounting yet.
This then raises the question, should you make the switch now or should you hold off and wait until the deadline gets closer?
My answer would always be to think about the wider benefits that come from having your data in a digital format. Think of it less as a need to comply with HMRC standards and more about how this can help you create efficiencies, automate manual processes and also have real-time insight into your business for making decisions.
Working on real-time information, as opposed to historical data always brings a deeper understanding for your accountant too. We love working with real-time data, it helps us spot trends and any challenges or opportunities in the future.
The other benefit of making the move to digital sooner rather than later, is it gives you more time to become familiar with your chosen software, helping you to unlock the full potential of the application and all the efficiencies it can bring. It also allows us to highlight any errors in your record keeping quickly, well ahead of any submissions to HMRC, meaning a more accurate submission for you and a smoother process for all concerned.
I’d suggest putting moving to digital on your 2023 to-do list. There are different packages depending on your budget and needs, but the benefits digital platforms bring, greatly outweigh the cost and time it takes to get set up.
The Digital Advisory team at Johnston Carmichael is ready and on hand to help at any time. If you’d like to arrange an initial chat to explore the options available to you, drop our team an email at digitalservices@jcca.co.uk or contact me directly at jenn.stewart@jcca.co.uk.
For more information visit www.jcca.co.uk.
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