Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) is a new government initiative to digitalise the UK tax system. MTD for ITSA will apply from April 2024 for unincorporated businesses and landlords with total business or property income above £10,000 per year. MTD for ITSA replaces the need for a self-assessment tax return.

What is New?

Digital Records: Businesses and landlords will be required to keep their records digitally and submit their business income and expenses to HMRC using MTD-compatible software. HMRC has approved spreadsheets as an acceptable solution for keeping digital records. You can still use your current spreadsheet template and submit data via approved Making Tax Digital bridging software.

Quarterly Submissions: Taxpayers will need to provide quarterly business income and expenses for each self-employment and property business. This information must be linked to the original digital records. After each submission, taxpayers will be able to review up-to-date information about their tax liabilities.

Annual Submissions: In addition to the quarterly submissions, there will be an option to submit annual adjustments, reliefs and allowances. At the end of the tax year, each mandated business income source (self-employment and property businesses) will need to be finalised; this will be done by agreeing with a declaration known as an End of Period Statement (EOPS). An EOPS will need to be provided for each income source separately.

Final Declaration (Crystallisation): Once all the necessary quarterly and annual information for all income sources is submitted and all EOPSs are provided, taxpayers will need to finalise their overall tax position for the tax year by providing a Final Declaration.