MTD ITSA record-keeping rules released
Making Tax Digital for Income Tax Self Assessment (MTD ITSA) recap. Starting in 2023/24, if you receive income greater than £10,000 per year from self-employment or rental income from land or buildings you’ll be required to make quarterly online reports of your business/rental income and outgoings, plus an annual summary. The first MTD ITSA report will therefore be for the quarter ended 5 July 2024, however you must have digital record keeping systems in place earlier.
Software. MTD ITSA means you’ll either have to use HMRC-approved software to keep your day-to-day business/rental income and expenses records or use a spreadsheet plus so-called bridging software to collate the data and make MTD reports to HMRC (click here ). HMRC’s draft regulations published on 1 July 2022 set out the format and type of information required (click here ).
Reporting format. Your reports must summarise income and outgoings from your records into the categories currently used for your annual self-assessment tax return. One difference is that you won’t be required to make adjustments for non-tax deductible items on the quarterly reports. These will be required on the annual summary report only. Retail businesses will be able to make a special election to exclude certain information from their reports, such as erroneously recorded sales.
Tip. Reporting will be more straightforward if you choose to use HMRC- approved software as the income and expenses categories will already be set up. If you use bridging software you’ll need to digitally link your records to fit the software.
Feedback. At the time of publishing HMRC is still mulling over the feedback it received on the draft regulations. It’s not likely to respond much before the end of 2022. Even then significant changes aren’t expected but if there are any we’ll let you know.
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