This article was published in October, 2021 and may no longer be accurate. To find out about the latest proposed updates from HMRC on MTD for ITSA please read our blog What the 2023 Autumn Statement Means for Making Tax Digital, published in December 2023.
HMRC recently announced that Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) has been delayed until April 2024.
This is recognition from the government that businesses are still facing challenges as we emerge from the pandemic. It’s welcome news for us at Xero, because we know how important this extra time will be for businesses and the accounting industry.
The delay gives accountants, bookkeepers and businesses more time to prepare for MTD for ITSA. Plus it provides a great opportunity for our partners to begin discussions with clients early.
However, this shouldn’t affect the plans you’ve got to migrate clients onto accounting software as soon as possible. HMRC has confirmed it will still be running its MTD for ITSA pilot from April 2022. And at Xero, we’re committed to providing a solution for our partners with clients who wish to join this pilot.
We’ve spoken to a number of our accounting partners who still want to join the pilot programme, despite the delay. We think it’s an excellent opportunity for practices to fully test out a full 12 months worth of submissions, along with End Of Period Submission (EOPS) and Final Declaration (previously known as Crystallisation) ahead of the mandated start date in April 2024.
How to prepare for MTD for ITSA
There is now clear guidance on what to expect with MTD for ITSA, following the publication of the full regulations. One key takeaway is that the quarterly updates are consistent across all businesses and landlords, regardless of financial year end. You can see how this looks below:
|6 April to 5 July
|6 July to 5 October
|6 October to 5 January
|6 January to 5 April
While it’s possible to make a calendar quarter election to remove the need for a business to report their quarterly data to the 5th of each quarter, it won’t be possible to stagger the digital start date. So it’s critical to be organised well in advance to ensure there are no last minute issues with quarterly submissions.
Will Xero support HMRC’s MTD for ITSA pilot?
We’ll support accountants, bookkeepers and their clients with MTD for ITSA as HMRC rolls out its pilot programme from April 2022. In the meantime, Xero partners can use Xero Tax for personal tax (as well as company accounts and tax), so can start using Xero for self assessment clients ahead of MTD for ITSA. This will make it a more simple transition in the lead up to April 2024.
What about MTD for VAT and Corporation Tax?
Most accountants, bookkeepers and affected businesses will hopefully be in the final stages of getting ready for MTD for VAT in April 2022. This is where all remaining VAT registered businesses – those under the £85,000 threshold – will be required to keep digital records and submit VAT returns electronically to HMRC through MTD compatible software.
We’re also committed to providing solutions for the entire MTD programme, and we’ll support MTD for Corporation Tax when it becomes mandated.
Revised MTD timeline
April 2022 – HMRC’s MTD for ITSA pilot will launch and the next phase of MTD for VAT takes effect
April 2024 – MTD for ITSA takes effect for sole traders and landlords
April 2025 – MTD for ITSA takes effect for Ordinary partnerships (not LLPs, mixed or corporate partnerships)
There is currently no indication of when complex partnerships (LLPs, mixed or corporate partnerships) will have to join MTD.
HMRC has always stated that MTD for Corporation Tax will be introduced no earlier than April 2026. No firm start date has been given, but it is likely this will be mandated between 2026 and 2030 to meet HMRC’s Digital Strategy.