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Self-employed individuals need to start thinking about how to prepare for the six reports per year they will need to submit to HMRC under the MTD for Income Tax Self-Assessment (MTD ITSA) regime.

Most sole traders and landlords (not partnerships or companies) will need to comply with MTD ITSA from 6 April 2024. This may seem a long way in the future, but there is a lot to do before then.

If your annual self-employed turnover, plus any rental income you receive, exceeds £10,000 per year, you will have to comply with the MTD ITSA regulations. Where you jointly own a let property, your share of the gross income must be added to your other trading income to compare the total against the £10,000 threshold.

The MTD ITSA rules require you to keep your business records in a digital format. That can be on a simple spreadsheet, or by using more complex accounting software, if appropriate to your business.

You will need MTD-compatible software to submit a report of your trading income and expenses to HMRC every three months as a ‘quarterly update’, which is due within one month of the end of the quarter.

Once the quarterly updates have been submitted for the year, that information is summarised and adjusted for any disallowable items, on an End of Period Statement (EOPS). This is the replacement for the self-employed and property sections in your annual tax return. You will need to submit a separate EOPS for each trading or property business you have.

Finally, your ‘finalisation statement’ for the year will include any other income, gains or claims you need to report to HMRC. This acts as the replacement for your current self assessment tax return.

The first step in this process is to get your business records into a digital format. Let’s talk about that, as soon as possible.

By |2022-09-13T11:34:53+01:00September 13th, 2022|News|