Making Tax Digital For ITSA Progresses: When Do You Need To Be Prepared By?
The HMRC private beta for Making Tax Digital for Income Tax Self Assessment (MTD ITSA) finally went live on 22nd April 2024. This applies to businesses whose annual income surpasses £50,000. If this is the case for your company – or could be in the next few years – then you need to be prepared.
MTD ITSA will become mandatory from April 2026 and the threshold will be lowered to £30,000 from April 2027, which means it’ll affect a significant number of small businesses. Here, we explain more about why you need to get ready for MTD ITSA, the value of digitalising your accounts, and what’s next for Making Tax Digital as a whole.
Why it pays to get ahead
The current beta is private and only involves approximately 1,000 taxpayers. However, public beta testing will open up from April 2025. Although you don’t have to take part in this, it could help you prepare to make your own tax digital.
In fact, it’s wise to get your taxes online as soon as possible. Why? Well, not only will it increase your chances of compliance, but it will also empower you to reap all the rewards of MTD…
Benefits of Making Tax Digital
Making Tax Digital has many advantages – both for ITSA and the other types of taxes it applies to. It enables real-time visibility and up-to-date records, leading to reduced errors and a higher likelihood of getting your taxes correct. As there’s extra support built into numerous software products and records are sent straight to HMRC, this further reduces the chance of making mistakes and incurring penalties. What’s more, the increased oversight you get throughout the year could empower you to lower your tax bill.
Other benefits of MTD include saving time on paperwork and administration. You can also opt to integrate tax management with your other processes via software as well as broader business planning.
The future of MTD
MTD ITSA is the second part of HMRC’s programme. They first digitalised VAT in 2019, with VAT-registered companies that met the taxable turnover threshold required to keep VAT records and submit VAT returns using compatible software in order to comply. Digital links became compulsory for MTD for VAT in 2021, and then MTD for VAT rules applied to all registered businesses – no matter their turnover – from 2022.
Once MTD ITSA is in place after April 2026, it’s expected that HMRC will start a voluntary pilot for MTD for Corporation Tax. This third phase will require applicable businesses to use MTD-compliant and HMRC-registered software to keep and report details relevant to Corporation Tax.
Make your taxes digital with Nabarro Poole
Moving your taxes online isn’t the most straightforward process, but it’s something we’re well versed in. Here at Nabarro Poole, we use cloud accounting software that is both MTD-compliant and easy to use. We can also support you through a range of bespoke services such as management accounts, budgeting, forecasting, and tax planning.
We’d be happy to help your business. Get in touch with our friendly team to digitalise your accounts and benefit from our specialist support.
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