Bookkeeping Bites – MTD ITSA Explained!

Making Tax Digital (MTD) – Income Tax for Self-Assessment (ITSA) Or ‘MTD ITSA’ as it is starting to be known!

“What are you going on about?”

MTD ITSA is Big G (HMRC)’s next bold step in digitalising tax services.

“I don’t get it, what does THAT mean?”

It means that Big G wants those people who complete a self-assessment tax return (SATR) to do it digitally.

“What? EVERYONE who completes a SATR?”

Well, no, not everyone actually. In the simplest terms, people who earn money through self-employment and people who receive rental income.

“Digitally? What does that mean? Do I do it via my digital TV?”

Errr. Nope. In HMRC lingo it is ‘using compatible software to create and store digital records of your accounts, sent quarterly updates, and send a final end of period statement’

“I still don’t get it! Whaaaaaaat?”

You need to use software to record the money in and out of your business.

You then need to send an update of this to Big G quarterly through a tax year.

And then again at the end of the tax year.

Simples. Right?

“But how the devil does that work with my shoebox of receipts that I take to my bookkeeper at the end of the tax year?!!”

 Well, putting it simply. IT DOESN’T. The shoebox will have to go. Lets book a ceremonial burning for it?

 “No! No! No! I DO NOT want to do this!! I LOVE my shoebox!! Is there any way around this? Can I get out of it?”

Most likely not… Sorry. There are a few automatic exemptions, but these are for very special circumstances.

There is an income exemption…. If your combined income is less than £10,000 in the 2022/23 tax year, Big G is saying, at the moment, you will be exempt from MTD ITSA.

“When? When will this start?”

6th April 2024, for the 2024/25 tax year….

“Well, what are YOU doing about it?

 That is easy. All of our sole trader clients are already on digitally compatible software for the 2021/22 tax year. That way we know ALL of our clients will be set up ready.

Then all that is left to do is get ready for the first quarterly update in the 2024/25 tax year. We are VERY relaxed about it all.

 “I want to know what to do, what should I do?”

Well, it is super simple. Speak to us about our sole trader packages.

We offer the ‘NOW Quarterly’ package – digitally compatible software and quarterly bookkeeping included – so you are set up for your MTD ITSA.

Hello, are you still there?

“Errrrrr, yes, I am. I am just reading about your sole trader packages – they look good. I feel calmer now. I will get in touch.”

Well, that is easy to do, just go to our contacts page and drop us an email… We would love to hear from you.