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Interactive Diagnostic

Stratford-upon-Avon

13 The Courtyard
Timothy's Bridge Road
Stratford-Upon-Avon
Warwickshire CV37 9NP

01789 294484

enquiries@gjassociates.co.uk

London

7-8 Stratford Place
Mayfair
London
W1C 1AY

0207 495 0304

enquiries@gjassociates.co.uk

Joining the MTD ITSA pilot

Many businesses and agents are already keeping digital records and providing updates to HMRC as part of a live pilot to test and develop the Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA). Under the pilot, qualifying landlords and sole traders (or their agents) can use software to keep digital records and send Income Tax updates instead of filing a Self-Assessment tax return.

The full launch of MTD for ITSA is expected to start from 6 April 2024. The rules will initially apply to taxpayers who file ITSA returns with business or property income over £10,000 annually. General partnerships will not be required to join MTD for ITSA until a year later, in April 2025. A new system of penalties for the late filing and late payment of tax for ITSA will also apply. Taxpayers interested in signing up for the pilot should contact their software provider or agent for further information. 

HMRC’s guidance on who can use the pilot has been updated as the pilot has been expanded. Currently to be eligible, taxpayers need to have an accounting period that aligns exactly to the tax year (6 April to 5 April) to join the 2022-23 pilot. The option to sign-up as an individual for MTD for ITSA is currently only available to individuals using a recognised provider offering software that is compatible with MTD for ITSA.

The pilot currently needs taxpayers who file for:

  • self-employment (including multiple self-employments)
  • UK property
  • Gift Aid
  • Pay As You Earn income, including employment income and occupational pensions (excluding those with a coded-out liability)
  • UK interest
  • UK dividends

Later this tax year, the pilot will be expanded to include the following customer types

  • pension contributions
  • CIS
  • Student Loans
  • additional Self-Assessment (SA 101)
  • foreign income from property
  • voluntary class 2 NICs
  • capital gains
  • marriage allowance.

Joining the MTD ITSA pilot

Some businesses and agents are already keeping digital records and providing updates to HMRC as part of a live pilot to test and develop the Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA). Under the pilot, qualifying landlords and sole traders (or their agents) can use software to keep digital records and send Income Tax updates instead of filing a Self-Assessment tax return.

The full introduction of MTD for ITSA is expected to start from 6 April 2024. The rules will initially apply to taxpayers who file ITSA returns with business or property income over £10,000 annually. General partnerships will not be required to join MTD for ITSA until a year later, in April 2025. A new system of penalties for the late filing and late payment of tax for ITSA will also apply. 

HMRC’s guidance on who can use the pilot has been updated. We have listed the main categories of who can and can’t join the pilot below:

You can voluntarily sign up for the service if all of the following apply:

  • you’re a UK resident,
  • you’re already registered for Self Assessment,
  • your accounting period aligns to the tax year — for example, 6 April 2021 to 5 April 2022,
  • you have submitted at least one Self Assessment tax return,
  • you’re keeping digital records,
  • one or more of the following were included in your last return: an existing self-employment income, a UK property source, a foreign property source.
  • you’re up to date with your tax records — for example, you have no outstanding tax liabilities.

You cannot sign up yet if you:

  • need to report income from any other sources,
  • have an Income Tax charge — for example, high income Child Benefit charges or certain pension tax charges,
  • have a payment arrangement,
  • do not have an up to date address with HMRC,
  • are a partner in a partnership,
  • are currently, or are going to be, bankrupt or insolvent,
  • are a Minister of religion, Lloyds underwriter or foster carer,
  • have a third party capacitor, this includes (but is not limited to): trusted helpers, insolvency practitioners, nominees and solicitors.

The option to sign-up as an individual for MTD for ITSA is currently only available to individuals using a recognised provider offering software that is compatible with MTD for ITSA.

Grenfell James Technology Adoption Index

How does your business perform against others adopting financial tech? Find out with our interactive diagnostic:

1.

How does your business receive invoices?

A)

Invoices are mainly received in paper form

B)

Invoices are mainly received by email

C)

Invoices are emailed then automatically forwarded to a designated mailbox

2.

How are purchase invoices processed?

A)

Invoices are entered manually

B)

Invoices are attached to manually raised invoices

C)

Automated software (e.g. ReceiptBank, 1Tap, HubDoc etc) collates invoices

3.

How are accounts processed?

A)

Using Excel/paper-based

B)

Using Computer-based, offline software

C)

Using cloud-based accountancy software

4.

How often is business data revised?

A)

Data is updated annually

B)

Data is updated quarterly

C)

Data is updated monthly or more often

5.

How is banking updated for your business?

A)

Banking is updated manually

B)

Banking is updated by imports

C)

Banking is updated via a live feed

6.

How are bank payments made?

A)

Bank payments are manual

B)

Bank payments are made using bulk imports

C)

Bank payments are made directly via accounting software

7.

How are bank receipts reconciled?

A)

Receipts are chased and reconciled manually

B)

Receipts are chased and reconciled automatically

C)

A third-party platform is used to chase debts and collect fees

8.

How often are management reports produced?

A)

No reports are provided

B)

Reports are provided but often too late to be valuable

C)

Reports are automated with real-time information

Score 8-12:

Curious Exploration

Your financial technology phase is Curious Exploration

% of respondent businesses are in this phase too.

Switching accountancy systems may seem like an upheaval, but can be much more straightforward than most businesses imagine. From talking to our clients, they have found moving from paper invoicing and desktop-based accounting software to the cloud and apps quickly makes the transition process a worthwhile investment of time. Digital accounting solutions bring in streamlined processes, up-to-date business data and greater confidence in the accuracy of information when making financial decisions.

Grenfell James works with your team to fully assess the needs of your business and minimise the impact of any transitions for solutions we recommend.

Find out more about App Advisory

More

Score 13-19:

Measured Discovery

Your financial technology phase is Measured Discovery

% of respondent businesses are in this phase too.

Once cloud accountancy software is in place, there’s still plenty of scope to improve your accountancy processes and make sure your business is maximising the benefits of adopting a digital accounting solution. Grenfell James assesses each business to understand how any implemented solutions are being used, identify areas for improvement and the needs of the business overall to support your business goals and achieve success.

Our team of experts can discuss a range of time-saving automation and get different apps and cloud-based solutions talking to create and manage a digital accountancy eco-system to help your business grow.

Find out more about App Advisory

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Score 20-24:

Bold Innovation

Your financial technology phase is Bold Innovation

% of respondent businesses are in this phase too.

You know the benefits of accounting technology and the impact it can have on your business goals. If you want to take it a step further, our team can conduct a systematic review of your processes, apps and business goals to ensure your digital accountancy ecosystem is keeping pace with the changing needs of a growing business.