You’ve probably heard the words Making Tax Digital (MTD) bouncing around and you’ve probably just let it go over your head if you're a Sole Trader or Landlord. However, when you hear the words MTD for ITSA you need to pay attention! ITSA stands for Income Tax Self Assessment which applies to you if you are a Sole Trader or Landlord. 

You don’t need to worry, it’s not coming into place until April 2024, but it is a good idea to get yourself prepared now. At LJM Bookkeeping we’ve been prepared for MTD for quite some time, so we’re the experts! We’ve made sure that our services are compliant with Making Tax Digital so you need not worry about it if you choose us as your bookkeeper. There are certain things you will need to know though, so please read on.

In order to be compliant with MTD you will need to keep and maintain your records digitally. This isn’t as scary as it sounds - it means things like having a bank feed connected to your software so we can see all transactions and scanning your receipts and invoices. This means you will need compliant software. We use Xero, but are exploring all options to make sure we have the best software in place for our clients. 

Under the obligations of MTD you will need to submit quarterly updates to HMRC to inform them of your income and expenditure. If you’re VAT registered you’ll already be doing this, the only difference is that the timings of the ITSA quarter and VAT quarter might not quite line up. At the end of the final quarter you will need to produce an End of Period Statement and complete a Final Declaration in order to clarify income from other sources such as savings and investments, a bit like the current self assessment. 

HMRC has introduced MTD in order to improve the UK tax system and become as efficient as possible. They have decided to do this in order to eliminate human error for records to be as accurate as possible. HMRC reported that between 2018/2019 tax errors cost the government £8.5 billion! There are over 4 million people that only declare their income on a self assessment, so having these stats earlier will also help inform the government about the true state of British Businesses. 

We fully support this change as technology is advancing quickly and although it may seem like too much to think about, if you leave your accounts in the hands of a bookkeeper, you won’t need to worry about anything! At LJM Bookkeeping we will ensure you are fully compliant before the deadline date and you’re always kept in the loop when it comes to deadlines in good time.

If you would like to discuss getting prepared for MTD then please get in touch!