MTD ITSA - another step closer
HMRC has picked up the pace on using Making Tax Digital for Income Tax Self-Assessment (MTD ITSA). Its new guidance explains how to join the scheme part way through a tax year. Is now the time for you to get on board?
Timetable
In April 2026, just 15 months away, sole traders and landlords whose turnover exceeds £50,000 per year (based on figures for 2024/25) will need to use Making Tax Digital for Income Tax Self-Assessment (MTD ITSA). In April 2027 MTD ITSA will be mandatory for sole traders and landlords with turnover exceeding £30,000 for 2025/26. For those with lower turnovers MTD ITSA won’t be mandatory but can be used voluntarily.
HMRC encouragement
After a few false starts HMRC launched the MTD ITSA pilot in April 2024. However, reports of the many problems with its predecessor have deterred many from signing up for this version. In a move to bring more sole traders and landlords on board, at the end of 2024 HMRC published new guidance on how to bring records up to date so that you can join MTD ITSA part way through the current or 2025/26 tax year. It has also published a “toolkit” to help you and your accountant get to grips with the fundamentals. Most bookkeeping software is now or soon will be compatible with MTD ITSA, and HMRC’s latest guidance contains links to these. If you use spreadsheets instead of bookkeeping software it’s still possible for you to use the MTD ITSA pilot through so-called bridging software. Details of these options are also in HMRC’s guidance.
No penalties
During the voluntary period HMRC will not penalise you with fines for late reporting or mistakes you make if they relate to using MTD ITSA. Naturally, the usual penalties continue to apply for failing to declare income etc. Joining the pilot will put you ahead of the game and allow you to iron out bookkeeping and reporting issues before it becomes mandatory
Related Topics
-
How much will you save with reduced scale charges?
HMRC has reduced the VAT fuel scale charge by nearly 6% for company-provided cars. When does the new reduced rate take effect and how do you make the calculations?
-
Avoid the trading allowance trap
In late 2024 you became self-employed. You’re now completing your tax return for 2024/25 and will claim the trading allowance instead of a tax deduction for business expenses. Could this impact your NI record and state pension entitlement?
-
Time off for fertility treatment?
A survey by Fertility Matters at Work has revealed that more than one-third of employees undergoing fertility treatment have resigned or are considering resigning because of the physical and emotional toll. Is there a right to time off for fertility treatment?