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Frequently Asked Question (FAQ’s)
This is an optional HMRC program where you can opt-in before mandation. The pilot will be opened further to include more types of income as we approach April 2024.
The pilot scheme is presently limited to certain income types and UK residents with income from one business and or UK property.
Additionally, this does not include people with income from employment or anyone who received a grant under the Self-Employment Income Support Scheme, the Coronavirus Job Retention Scheme, or the Eat Out to Help Out scheme.
HMRC have indicated the pilot scheme eligibility will be extended closer to April 2024.
You can leave the pilot if you decide it’s not for you or remain in the pilot and still send a Self-Assessment tax return as usual.
MTD for ITSA is now in legislation, so we very much doubt it. There is a lot of talking taking place; however, it is still going ahead at this moment in time.
It was first intended to start after Gordon Brown, the then chancellor, initiated Making Tax Digital in 2015.
Sign up ahead of the April 2024 mandation to get started. Even if you sign up for the pilot now, you are not required to submit anything until you are mandated in.
If you are unable to join the pilot this year, organise your software and/or spreadsheets and talk to your accountant about the end of period statement and final declaration.
Each quarter you will be required to submit your income and defined categories of expenses. This matches SA103F (Self-employment Full) and SA105 (UK Property); however, this may be subject to change. For each quarter, only profit and loss data, not balance sheet information, is required.
Your turnover
Any other business income not included in turnover
Trading income allowance
Cost of goods bought for resale or goods used
Construction industry
Wages, salaries and other staff costs
Car, van and travel expenses
Rent, rates, power and insurance costs
Repairs and maintenance of property and equipment
Phone, fax, stationery and other office costs
Advertising and business entertainment costs
Interest on bank and other loans
Bank, credit card and other financial charges
Irrecoverable debts written off
Accountancy, legal and other professional fees
Depreciation and loss/profit on the sale of assets
Other business expenses
Total expenses
Property Income
Total rents and other income from property
Property income allowance
Traditional accounting used
Tax taken off any income in box 20 (total rents and other income from
property)
Premiums for the grant of a lease
Reverse premiums and inducements
Property Expenses
Rent, rates, insurance and ground rents
Property repairs and maintenance
Non-residential property finance costs
Legal, management and other professional fees
Costs of services provided, including wages
Other allowable property expenses
Furnished holiday lettings in the UK
Income
Property income allowance
Traditional accounting used (Y/N)
Rent paid, repairs, insurance and costs of services provided
Loan interest and other financial costs
Legal, management and other professional fees
Other allowable property expenses
Private use adjustments
In the same way that spreadsheets are allowed in MTD for VAT and are recognised by HMRC as a digital record, the same will apply to MTD for ITSA.
However, the data from the spreadsheet must be transmitted with a digital link, commonly known as bridging software. Of course, the data source can still be paper and entered into a spreadsheet, so there is no need to buy bookkeeping software.
Yes, we intend to create and provide a template spreadsheet for MTDfSA & MTD for
ITSA.
The date of the transaction
The trade or property the income relates to
Retailers can use daily totals rather than each transaction if they do not have digital transaction software
The category of the expense
The amount (net of VAT)
Business Income (e.g. turnover)
Business Expenses (total & disallowable by type of expense, e.g. travel costs)
Tax Allowances for vehicles & equipment (e.g. capital allowances)
Adjustments (e.g. basis adjustment)
Balancing charges
Goods & Services for own use
This data includes income, expenses, allowances and adjustments for their UK property business.
The data required below is for each property. However, this forms the parts of one collective property return.
UK property business income for both Furnished Holiday Lettings (FHL) and Other rentals (e.g. rent income)
UK property business expenses (total by type of expense, e.g. premises running costs)
Allowances (e.g. annual investment allowance)
Adjustments (e.g. loss brought forward)
Balancing charges
Furnished Holiday Lettings (FHL) are short term (e.g. 1-2 weeks) lets of a furnished property. Please see here for further guidance regarding FHL properties.
Please note that a customer’s UK property business must already be known to HMRC.
Quarterly period 1
The period beginning with the first day of the tax year (6 April) and ending with the following 5 July
Quarterly period 2
The period beginning with the day immediately following the end of quarterly period 1 (6 July) and ending with the following 5 October
Quarterly period 3
The period beginning with the day immediately following the end of quarterly period 2 (6 October) and ending with the following 5 January
Quarterly period 4
The period beginning with the day immediately following the end of quarterly period 3 (6 January) and ending with the following 5 April
Quarterly period 1 – 5 August following the end of quarterly period 1
Quarterly period 2 – 5 November following the end of quarterly period 2
Quarterly period 3 – 5 February following the end of quarterly period 3
Quarterly period 4 – 5 May following the end of quarterly period 4
As accurate as possible. However, this can be amended in future submissions and the end of period statement (EOPS). It is expected to be an approximately accurate profit and loss report.
The taxpayer does not have to declare that the submissions are ‘complete and correct’ (there is no ‘accuracy’ statement required), but must indicate that they do not intend to provide any additional information at this point.
There is nothing to stop them from providing additional information anytime by resubmitting the update period with any changes that have been made to the previous submission.
Yes. The periodic information does not need to be provided in one go.
Clients can submit data as frequently as they like, for example, monthly. An example would be someone on a monthly VAT cycle who may wish to submit monthly income and expense records.
You will be able to amend return data, and you always have the opportunity to submit the corrected amounts.
An end of period statement (EOPS) for each income stream and a final declaration.
This includes:
An EOPS must be completed for each source of the customer’s business income (similar to the current Income Tax process for the SA103 and SA105 schedules).
For example, if a customer has one self-employment business and one property business, they will have to complete two EOPS.
This needs to be submitted no later than 31 January as usual.
The underlying business information for the header record for your MTD for ITSA registration.
To sign up, you will need:
First name
Last name
Date of birth
National Insurance number
Self-employed business (one or more)
Trading start date
Accounting period dates
Business name
Business address
Accounting type such as cash basis or accruals
For property income:
The start date of rental income
Accounting period dates
Employments
Other Employment Income
Dividends income
Foreign income
Insurance policies income
Pensions income
Other income
Savings income
Disclosures
Pension charges
Pension reliefs
Individual reliefs
Other deductions
Individual expenses
State benefits
Losses
One self-employment income
If your gross income is £10,000 or more, you must enrol in MTD for ITSA
Two or more self-employment incomes
If your gross income is £10,000 or more, you must enrol in MTD for ITSA for each income stream which is £10,000 or more
If you are paid via PAYE only
You are not included in MTD for ITSA
If you receive incomes from both self-employment and property
If your income is below £10,000 (excluding any income from employment paid through payroll attracting PAYE and NI) but you have property income which when added to your self-employed income takes you to £10,000 or more, you will have to enrol in MTD for ITSA for each self-employment income and property income.
If you jointly receive an income from a property or properties
Only if your element of the income is £10,000 or more will you have to enrol
in MTD for ITSA.
If you are married and jointly receive an income from a property or properties
The income is allocated to you on a 50/50 basis unless you have informed
HMRC otherwise.
If you own the property or properties with other individuals
You can allocate the income as you wish between yourselves.
If you have both property and self-employment income
Suppose your property income is below £10,000 and you have self-employment
income (excluding any income from employment paid through
payroll attracting PAYE and NI), which takes your overall income to £10,000
or more when added to your property income then you will have to enrol in
MTD for ITSA for each self-employment income and property income
Non-resident landlords
Only if your element of the income is £10,000 or more will you have to enrol in MTD for ITSA.
If a limited company owns the property or properties
MTD for ITSA will not apply.
Furnished holiday lets
Included in MTD for ITSA, where the income is £10,000 or over, subject to the examples above.
Other clarifications
Flats, apartments and commercial are classified as properties. No distinction is made for the type of property.
No distinction is made whether the property is furnished or unfurnished.
If a property is sold or disposed of
This is a Capital Gains Tax liability and not treated as income for MTD for ITSA.
If you have multiple properties
The £10,000 limit is for income from all properties and is not against each property.
Tenancy repair deposits
They are considered income but can be offset in the detail of the expenses by any repair costs.
Partnership income
If £10,000 or above is deemed to be partnership income and falls within MTD
for ITSA rules, it must be submitted by the partnership.
Individual partners
Individual partners will not be mandated to report their partner income
quarterly.
Personal income
Partnership income is not treated as part of your personal income for MTD
for ITSA purposes.
The change in basis periods will mean that Self-Assessment individuals and businesses will have to align their tax year with 6th April to 5th April tax year.
However, landlords’ basis period always mirror 6th April to 5th April tax year so they shouldn’t be affected.
It is expected that MTD for ITSA and the basis period change will coincide.
For more detail: HMRC basis period reform policy paper.
If you have signed up for the pilot, you do not need to submit under the current system – with some exceptions as below. If not, you still need to submit one for the tax year as expected.
Pilot scheme exceptions: If you have a declaration for things outside of the initial scope for MTD for ITSA, you will still need to submit a Self-Assessment return in addition to your MTD for ITSA obligations. At the time of writing, examples of these are gains, charitable donations and certain tax reliefs.
The current return is one submission per year for all your income, expenses and adjustments.
MTD for ITSA requires quarterly submissions and EOPS for all sources of income plus a final declaration bringing everything together.
That’s moving from one submission per year to five (quarterly updates plus the return), with another set of quarterly updates for each income stream!
You must keep your records digitally and have a bridge from your digital records to HMRC. This must be digital (using compatible software) and cannot be done manually by typing in numbers. You still have to retain your records as per the existing legal retention period.
Recent research shows that the benefits of using MTD software outweigh the costs and give the user more confidence in trusting the accuracy of the data submitted.
Additionally, by submitting quarterly, you can spend more time running your business because you have a more structured approach and are doing this in a small amount of time.
HMRC have published a paper in relation to MTD for ITSA: Customer costs and benefits for the next phases of Making Tax Digital
There is no tax due on the quarterly returns, and you will continue to pay tax on the dates that you would under the current Self-Assessment returns payment dates.
HMRC will return a calculation based upon your quarterly submission with your estimated tax liability at that point.
The short answer is no – not yet. It is envisaged that this will result from this initiative and quarterly payment on account may become part of the tax payment regulations.
A late filing penalty will be introduced in April 2024 for those who have failed to submit four quarterly submissions. This is in legislation now, and the financial penalty will be based on a points-based system.
Of the 5 million self-employed (businesses) and landlords, it is expected to affect 4.7 million, of which 1.3 million are landlords.
It’s the same digital approach; however, more data points must be submitted, so it is nowhere near as simple. However, it is simple to manage if you are an incidental landlord or have a non- complex business
It’s the same digital approach; however, more data points must be submitted, so it is nowhere near as simple. However, it is simple to manage if you are an incidental landlord or have a non-complex business.
Making Tax Digital (MTD)
An HMRC initiative, and for Self-Assessment, it is known as MTD for ITSA.
Digital start date
Your first day under MTD.
Obligation period
The quarterly period you are sending returns in for.
End of period statement (EOPS)
The annual version of the summed quarterly periods plus adjustments for
allowances, reliefs, disallowable expenses, etc. The taxpayer must declare
this to be an accurate statement following any adjustments. Additionally,
this identifies the properties which form part of a property business.
Final Declaration (Crystallisation)
The final declaration including all sources of income, e.g., dividend and
interest received and losses. HMRC have indicated they will provide a
submission interface for filing this without the need for software.
The maximum of one point per month for two or more failures relating to the same submission obligation in the same month will not apply across different MTD for ITSA submission obligations. So, if an ITSA taxpayer has a quarterly regular update deadline, an End of Period Statement (EOPS) deadline and a Final Declaration deadline in the same month, they can accrue three points if they miss all three deadlines.
Where a taxpayer with MTD for ITSA submission obligations has two or more businesses (and is therefore required to submit separate regular updates and EOPS for each business), they will have one points total for all those submissions for different businesses. Where the taxpayer submits one or more of each of the different types of submissions late, they will only accrue a maximum of one point. For the purposes of this rule, tax year quarters will be used (rather than business accounting period quarters, which differ from business to business).
For example, if a taxpayer has three businesses and they fail to meet an ITSA regular update deadline falling in quarter 1 for either one, two or three of their businesses, they will accrue one point. If the same taxpayer fails to meet the EOPS deadline for either one, two or three of their businesses, they will accrue an additional point. If the same taxpayer fails to provide their Final Declaration by the deadline, they will accrue an additional point.
HMRC’s publication: Penalties for late submission
Companies, Charities and all other partnerships (excluding General partnerships that have only individuals as partners) are not required to join MTD for ITSA in April 2024/2025 (examples include those that have corporate partners, Limited Partnerships or Limited Liability Partnerships) but will be required to join MTD for ITSA at a future date to be confirmed.
Trusts, estates, trustees of registered pension schemes and non-resident companies will not be required to join MTD for ITSA.
Yes, you can ask your accountant to submit all the quarterly and annual returns. However, you must provide them with the information that’s required. This can be in the form of digital data or the actual paper records for the practice to collate and submit on your behalf.
Only if you qualify under the digital exclusion rules
If you have one or more businesses or properties, you must submit one for each income stream. If you have several businesses, then you need to do one for each business.
If you are a sole trader business and or landlord and have a combined income of £10,000 and over, you are mandated into MTD for ITSA from April 2024. You can get ahead of the Mandation by joining the public pilot earlier.
This replaces the self-assessment return in most cases.
If you are a partnership (only some to be included at the time of writing) and have a total income of £10,000 and over, you are mandated into MTD for ITSA from April 2025.
From April 2024, with your first whole accounting period starting on or after 6 April 2024. If you qualify, you can join from April 2022. Businesses that draw their accounts up to 31 March 2024 will be mandated into MTD for ITSA from April 2024.
It is determined by looking at the tax year two years before April 2024 to establish if you are mandated into MTD for ITSA. If you’re a new business or landlord, you will have to be trading for a time before you are mandated into MTD for ITSA.
Self-employed (Businesses) and landlords.
General partnerships that have only individuals as partners.
If you only have one self-employment = 1
If you have one property income = 1
If you have one self-employment and one business = is this 1 for each? TBC
If you have two self-employment incomes = is this 1 for each TBC
If you have two property income = is this 1 for each, even if one or both are below £10,000 TBC
The End of period Statement (EOPS) is just one.
And finally, it’s just one final declaration which crystalises everything. If you have several properties, then you only require one return. However,
the income and expense are to be recorded for each property within the return
Yes, even though you may be registered for self-assessment, HMRC will not transfer you across automatically
It is envisaged that the portal will open to all mandated businesses and landlords for registration closer to April 2024. However, if you fit the criteria, you can join the pilot from April 2022.