MTD for ITSA New Guidelines Released – What do you need to know?

Making Tax Digital for Income for Tax Self-Assessment (MTD for ITSA) is currently being rolled out across the United Kingdom. The next phase of MTD for ITSA will be required starting in April 2024. 


So if you are self-employed, you are required to comply with the new standard. Anyone who rents out a property with a turnover of more than £10,000 per annum will also be affected by the initiative. 


However, with the new initiative, you will no longer have to go through the hassle of filling out the annual Self-Assessment tax return.


Let’s look at the newest guidelines released by HMRC Revenue and Customs (HMRC) on the self-assessment process. The four guidelines released recently lead taxpayers to sign up for MTD for ITSA. They also include how they may satisfy the criteria, which are as follows.



The guideline does help explain who has to register and who does not. These do not provide all the answers to the questions people have about the initiative. However, it offers many other details related to the project — which is good progress. 


Who is eligible for the MTD for ITSA?

 The 3 main requirements that you need to fulfil to be eligible to take part in the programme are as follows. 

  1. Registered in Self-Assessment
  2. Earn your income from self-employment or property, or both
  3. Have over £10,000 of a total qualifying income 

Here the qualifying income comprises self-employment and property income that you earned in a tax year. However, income from dividends or savings, or employment, is not considered here. 

According to the guidance issued by HMRC, for non-residents, only their UK-Self-employment income would be considered for the qualifying income. The guidelines also share the list of people who are ineligible to take part in the programme.

Which includes,

 · A trustee (Including a charity trustee or the trustee of a non-registered pension plan trustee), 

 · A personal representative (Representing the estate of a dead person), 

 · A member of Lloyd’s (In respect to their underwriting activity)

 · A non-resident enterprise. 


On the other hand, if an individual has an annual income of less than £10,000 (from self-employment, rental income, or other sources), they can take part in the programme of their own will. But this is not demanded by HMRC. 

After a company has completed all of the necessary steps to finalise its revenue, HMRC might request information on personal income sources. Earnings on savings in the form of interest or dividends should be included here. After the final tally of the company’s income makes up, this task should be completed. 


When do you need to sign up for MTD for ITSA?

As you will see when you open the check when to sign up for Making Tax Digital for Income Tax advice, the MTD for ITSA criteria needs to be satisfied starting on April 6, 2024. 

Before being allowed to participate in MTD for ITSA, taxpayers must fulfil the prerequisite of filing their self-assessment tax return for 2022–2023 by the deadline of January 31, 2024. 

In addition, the HMRC says that it will analyse the return in question. This is to determine whether or not the taxpayer has an annual income of more than £10,000. And if it does, HMRC will also check to see if the person is eligible for an increased amount of government support or not. 

After that, HMRC will send a letter to the taxpayer. The letter would explain why they need to register and proceed with compatible software placement and authorisation. Then the first self-assessment tax return should be completed. Tax payment on essential software is the responsibility of the payer or accountant.

Landlords and self-employed persons with businesses not commencing operations before April 6, 2023, are not expected to meet the MTD for ITSA requirements till their first self-assessment tax return submission. 


MTD for ITSA Pilot scheme 

Even though it is not necessary at this time, some taxpayers have voluntarily participated in a live test pilot project for Making Tax Digital’s income tax self-assessment component. It can be good for you to join them to learn about the new standards for MTD for ITSA and find solutions to any software problems you might experience.

You now have the opportunity to use the various advantages MTD offers for ITSA. For instance, based on the data you’ve supplied, you’ll be aware of the amount of tax due to the government every three months which will assist you in planning your finances appropriately.

To begin, you will need to ensure that the version of software you are using is compatible with the Making Tax Digital for Income Tax system.

To sign up for self-assessment, you need to be a citizen of the United Kingdom or a permanent resident of the country. You also need to keep all of your income tax forms and payments up to date here. The official website has all the information you need, which you may find at Gov.UK.


What do you need for MTD for ITSA Pilot programmes?

If you are interested in joining the MTD for ITSA and familiarising yourself with the new initiative is important. Also, you should know how everything works. So let’s look at how. 

· Accounting software that is compatible with Making Tax Digital for Income Tax

 · Well-maintained digital records in the software

 · Quarterly business income and expenses update submissions. 

 · End-of-period statement submission

 · A final declaration submission 


Other important things you should know

According to the guidelines, you should re-authorise your software every 18 months. You will get reminders from the software about the re-authorisation. So you won’t have to keep the dates in your head. 

Currently, businesses should provide a quarterly report of the 5th day of the month. However, this might get more flexible in the future, according to the HMRC, and you will have the freedom to use calendar quarters.


Final thoughts 

The new guidelines released indeed provide more details to self-assessment taxpayers on MTD for ITSA. However, they still lack a lot of information and do not provide answers to many of the questions people have regarding the programme. This leaves accountants seeking additional information on sticky problems, like why they didn’t select calendar quarters for quarterly reporting.

The good news is HMRC is expected to provide further information on execution soon. 

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