- Making Tax Digital
MTD known as Making Tax Digital is the UK government’s flagship programme to help businesses and individuals like sole traders with their tax records and submission.
It does this by digitalisation of recording tax data and submission. Making Tax Digital for Income Self Assessment (ITSA) will come into force in April 2024, but action is needed now.
MTD ITSA will be applicable to self-employed business owners and landlords whose property and income exceed £10,00 in a tax year.
Although there is still two years time for the implementation, accountants and clients must start working together to ensure readiness for it.
The Government currently is running a scheme allowing few businesses to try the service before it is made mandatory for all.
What will MTD ITSA involve?
● End of Period Statement (EOPS)
● Final declaration at the end of the tax year
● Four quarterly updates to HMRC with income and expenses details
MTD ITSA requires more administration than the previous system so scrupulous record-keeping will be essential moving forwards.
Here are some steps to help self-employed people switch to the digital process.
Implement compatible software
There is still not enough guidance from HMRC around Making Tax Digital Income Tax Self-Assessment (MTD ITSA) for which the changeover for accountants is becoming a harder job than necessary.
The biggest challenge is convincing the clients to see the value of MTD. We, as humans, are reluctant to change, especially when it is something related to finances. Hence, we are working harder to showcase to clients that this switch to digitalization is in fact a positive one.
It requires a proper demonstration about what other benefits the business can leverage from MTD ITSA compliance. The simplest and best way is to show how much time can be saved through this way of working for a client and what that means in terms of finances. Another benefit of MTD ITSA is that it enables clients to be more aware of their cash flow, which helps them to plan their budget better and gain more profits.
The whole process of digitization has hugely created an explosion of promotion in the software market. This means that there is quality, value, and choice to be found from the providers and it’s a win for businesses.
Digital Record Keeping
It’s time that businesses who are not yet keeping digital records should start digital record-keeping. As for individuals who still submit their own tax returns and plan to do so even after the introduction of MTD ITSA, they must ensure that they have the software that is compatible with MTD ITSA. Once MTD ITSA has been introduced they will not be able to use the existing self-assessment software of HMRC.
For individuals who will seek the service of a tax adviser need to prepare and submit the four quarterly updates and end of year submissions to HMRC. They must also write to them explaining the process they need to follow when MTD ITSA is introduced.
Streamline existing software systems
Prepare to streamline existing software processes using compliance automation wherever possible, or move to cloud-based platforms. It is important to have a clear picture of the type of businesses their clients have. In many cases, they can’t anticipate or are unaware of the level of income or expenses their client will generate and are in the dark about clients’ record-keeping processes. In such cases They won’t be able to plan resources effectively or predict potential roadblocks when MTD for ITSA comes into force in April 2024.
Look out for available software
Although there is still time for implementation of the digital process, businesses should already start looking at software which can assist them in meeting their requirements. There are a lot of options in providers with different capabilities and different grades of packages. Hence, researching ahead of time will ensure which package suits their business needs best.
If you are self-employed looking for expert help regarding MTD for ITSA, we at CoreAdviz are ready to take you through the entire process in an efficient and time saving way.