Update on MTD for ITSA

Almost a decade ago, Parliament announced Making Tax Digital (MTD). Since then, it’s been rolled out for VAT-registered businesses, but delayed for income tax self-assessment (ITSA) many times.

That means that MTD for ITSA – which was meant to begin in April 2018 – is very different from the version that will be introduced in April 2026.

So, what’s changed? What do you need to know about MTD for ITSA in 2024? Let’s have a look.

What you need to know

MTD is the Government’s flagship policy for digitising the UK’s tax system. There are two main arguments for the scheme. First, it should – in theory – be simpler for businesses to understand and stay on top of. Second, it should prevent businesses from making mistakes that see them paying too little in tax and close the tax gap.

You might have read about the requirements, but it’s important to note that they changed somewhat in the Autumn Statement delivered last year.

Under MTD, you need to use software that works with MTD for ITSA. The software must allow you to create and store digital records of each business transaction. You will then use this data to send updates of the totals of your business income and expenses every three months as a quarterly update straight to HMRC.

After you submit an update, you can see an estimate of your tax bill with your software. You can adjust the data you submit if you need to.

At the end of the tax year, you will also need to make your final declaration, which declares that:

  • The information you have provided is correct and complete.
  • You have finalised your Income Tax position for the tax year.

This step replaces the need to send a self-assessment tax return. The deadline is still 31 January following the end of the relevant tax year.

What software can I use?

So, you need to use software that works with MTD, but what does that mean? Just know that there are a lot of options available to you.

The first pathway is to look at cloud-based solutions like QuickBooks, Xero and FreeAgent, which offer a range of features tailored to all MTD requirements – particularly digital record-keeping and connection to HMRC.

These platforms also have the added advantage of the unique features cloud accounting technology can offer, such as automated processes for streamlined processes and accessibility to data.

Alternatively, you can use bridging software to connect non-compatible software (like spreadsheets) to HMRC systems. It doesn’t take care of other MTD requirements, such as digital record keeping, and it doesn’t ensure your systems are digitally linked.

Other changes to MTD for ITSA

As we said earlier, the government announced several changes to MTD for ITSA. The most notable include:

  • Quarterly updates will move to a cumulative basis so errors can be corrected during the following update.
  • The End of Period Statement has been removed as a formal requirement.
  • Foster carers and self-employed individuals without a National Insurance number are exempt from MTD for ITSA.
  • Landlords who jointly let property can only report income and not expenses on quarterly updates.
  • More than one agent can represent taxpayers.

Get ready for MTD for ITSA

There’s still plenty of time to prepare for MTD for ITSA and get used to the system. However, if you ever get stuck while learning about your new responsibilities under the scheme, just know that PB Sydall is always here to help.

Talk to us about MTD for ITSA.