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What Is MTD ITSA, and How Will It Affect Self-Employed Individuals?

Chris White • January 17, 2025

Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is a major shift in the way self-employed individuals and landlords in the UK manage and report their taxes. This government initiative aims to modernize the tax system, reducing errors and streamlining the process.

If you’re self-employed or a landlord, MTD ITSA will affect how you record your income and file tax returns. Here’s everything you need to know about what it is, how it will impact you, and how to prepare for the change.


What Is MTD ITSA?

MTD ITSA stands for Making Tax Digital for Income Tax Self Assessment. It builds on the government’s Making Tax Digital initiative, which is already in place for VAT. MTD ITSA focuses on digitizing how self-employed individuals and landlords report their income tax.

Under MTD ITSA, you’ll need to:

  • Keep digital records of your income and expenses.
  • Submit quarterly updates to HMRC using MTD-compatible software.
  • File an End of Period Statement (EOPS) and a Final Declaration to confirm your annual income and tax obligations.


Who Does MTD ITSA Apply To?

MTD ITSA will roll out in phases:

  1. April 2026: Applies to self-employed individuals and landlords with an annual income exceeding £50,000.
  2. April 2027: Expands to those earning between £30,000 and £50,000 annually.

Future plans for individuals earning below £30,000 are still under consultation, so it’s essential to stay updated.


How Will MTD ITSA Affect You?

  1. Digital Record-Keeping
    If you currently use spreadsheets or paper records, you’ll need to switch to MTD-compatible software to maintain digital records.
  2. Quarterly Reporting
    Instead of submitting one annual Self Assessment tax return, you’ll file
    four quarterly updates summarizing your income and expenses.
  3. End-of-Year Submissions
    You’ll still finalize your accounts at year-end, but the process will be streamlined with digital tools.
  4. More Transparency
    With quarterly updates, you’ll have a clearer view of your tax obligations, reducing surprises at year-end.


What Do You Need to Do to Prepare for MTD ITSA?

  1. Check if MTD ITSA Applies to You
    Review your annual self-employment or rental income to determine when you’ll need to comply.
  2. Choose MTD-Compatible Software
    Popular options include QuickBooks, Xero, and FreeAgent. We can help you select and set up the right software for your business.
  3. Organize Your Records
    Ensure your income and expenses are up to date and transition from paper records to digital systems.
  4. Learn the New Process
    Understand how to submit quarterly updates, End of Period Statements, and the Final Declaration.
  5. Seek Professional Advice
    Navigating MTD ITSA can be challenging, especially if you’re new to digital accounting. A trusted bookkeeper can guide you through the process and ensure you remain compliant.


How CW Licensed Bookkeeper & Accountant Can Help

At CW Licensed Bookkeeper & Accountant, we understand that MTD ITSA can feel overwhelming. That’s why we’re here to make the transition as smooth as possible. Here’s how we can support you:

  1. Tailored Advice
    We’ll help you understand how MTD ITSA impacts your specific situation and create a plan to ensure compliance.
  2. Software Setup and Training
    We’ll assist in choosing, setting up, and training you on the best MTD-compatible software for your needs.
  3. Quarterly Reporting Support
    Let us handle your quarterly updates to HMRC so you can focus on running your business.
  4. Year-End Submissions
    From the End of Period Statement to the Final Declaration, we’ll ensure your year-end reporting is accurate and timely.
  5. Ongoing Support
    We’re here to answer questions, provide troubleshooting, and keep you on track with MTD requirements.

๏ปฟ

Get Ready for MTD ITSA Today!

MTD ITSA is a significant change, but you don’t have to navigate it alone. With CW Licensed Bookkeeper & Accountant by your side, you can make the transition stress-free and compliant.

๐Ÿ“ง Contact us today at info@cwabc.co.uk
๐Ÿ“ž
Call us on 07306 812321
Let us help you prepare for the future of tax reporting!

By Chris White January 17, 2025
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๐ŸŽต On the first day of Christmas, my accountant sent to me: A client with a shoebox of receipts! ๐ŸŽต On the second day of Christmas, my accountant sent to me: Two tax deadlines, And a client with a shoebox of receipts! ๐ŸŽต On the third day of Christmas, my accountant sent to me: Three missing invoices, Two tax deadlines, And a client with a shoebox of receipts! ๐ŸŽต On the fourth day of Christmas, my accountant sent to me: Four bank mismatches, Three missing invoices, Two tax deadlines, And a client with a shoebox of receipts! ๐ŸŽต On the fifth day of Christmas, my accountant sent to me: Fiiiiiive… late… PAYE!!! Four bank mismatches, Three missing invoices, Two tax deadlines, And a client with a shoebox of receipts! ๐ŸŽต On the sixth day of Christmas, my accountant sent to me: Six overclaimed expenses, Fiiiiiive… late… PAYE!!! Four bank mismatches, Three missing invoices, Two tax deadlines, And a client with a shoebox of receipts! ๐ŸŽต On the seventh day of Christmas, my accountant sent to me: Seven QuickBooks glitches, Six overclaimed expenses, Fiiiiiive… late… PAYE!!! Four bank mismatches, Three missing invoices, Two tax deadlines, And a client with a shoebox of receipts! ๐ŸŽต On the eighth day of Christmas, my accountant sent to me: Eight petty cash errors, Seven QuickBooks glitches, Six overclaimed expenses, Fiiiiiive… late… PAYE!!! Four bank mismatches, Three missing invoices, Two tax deadlines, And a client with a shoebox of receipts! ๐ŸŽต On the ninth day of Christmas, my accountant sent to me: Nine reconciliations, Eight petty cash errors, Seven QuickBooks glitches, Six overclaimed expenses, Fiiiiiive… late… PAYE!!! Four bank mismatches, Three missing invoices, Two tax deadlines, And a client with a shoebox of receipts! ๐ŸŽต On the tenth day of Christmas, my accountant sent to me: Ten direct debits missing, Nine reconciliations, Eight petty cash errors, Seven QuickBooks glitches, Six overclaimed expenses, Fiiiiiive… late… PAYE!!! Four bank mismatches, Three missing invoices, Two tax deadlines, And a client with a shoebox of receipts! ๐ŸŽต On the eleventh day of Christmas, my accountant sent to me: Eleven VAT adjustments, Ten direct debits missing, Nine reconciliations, Eight petty cash errors, Seven QuickBooks glitches, Six overclaimed expenses, Fiiiiiive… late… PAYE!!! Four bank mismatches, Three missing invoices, Two tax deadlines, And a client with a shoebox of receipts! ๐ŸŽต On the twelfth day of Christmas, my accountant sent to me: Twelve sleepless nights, Eleven VAT adjustments, Ten direct debits missing, Nine reconciliations, Eight petty cash errors, Seven QuickBooks glitches, Six overclaimed expenses, Fiiiiiive… late… PAYE!!! Four bank mismatches, Three missing invoices, Two tax deadlines, And a client with a shoebox of receipts! ๐ŸŽ„๐Ÿงพ Cheers to the bookkeepers keeping it all together—mostly! ๐ŸŽ„ ๐ŸŽ„ As the holidays roll in, so does the end-of-year financial chaos! Bookkeepers and accountants often feel like they're living through their own version of the "12 Days of Christmas." With that in mind, here's a humorous breakdown of the realities we face—perfect for our clients to appreciate the juggling act behind the scenes. Day 1: A Client with a Shoebox of Receipts The Reality: This classic trope never gets old—or easier. Shoeboxes filled with crumpled, fading receipts are the bane of a bookkeeper’s existence. Pro Tip for Clients: Switch to digital receipt storage! Apps like Dext or Hubdoc can save you (and us!) hours of work. Day 2: Two Tax Deadlines The Reality: Tax deadlines seem to multiply like rabbits, and missing one can mean penalties. Whether it’s VAT or income tax, the clock is always ticking. Pro Tip for Clients: Mark your calendar now and get your documents in early—we’ll make sure you stay penalty-free. Day 3: Three Missing Invoices The Reality: A missing invoice means chasing payments, which affects cash flow and makes reconciliation a nightmare. Pro Tip for Clients: Stay organized with invoicing software. Send reminders to clients, and always save digital copies. Day 4: Four Bank Mismatches The Reality: Reconciling bank accounts can feel like solving a mystery. When transactions don’t match, it’s hours of detective work. Pro Tip for Clients: Regularly review your statements and report discrepancies immediately to avoid delays. Day 5: Fiiiiive… Late… PAYE!!! The Reality: Late payroll submissions lead to fines and disgruntled employees. It’s a big red flag in any business. Pro Tip for Clients: Automate PAYE submissions with payroll software to keep everything on track. Day 6: Six Overclaimed Expenses The Reality: Overclaimed expenses lead to audits, penalties, and sleepless nights for everyone involved. Pro Tip for Clients: Only claim expenses that are clearly business-related. When in doubt, consult with us! Day 7: Seven QuickBooks Glitches The Reality: Tech is wonderful—until it’s not. Software glitches can throw off entire reports and cause endless frustration. Pro Tip for Clients: Regular updates and backups can prevent most issues. Let us troubleshoot if you’re stuck. Day 8: Eight Petty Cash Errors The Reality: Petty cash is the small but mighty troublemaker. Errors here often pile up unnoticed until year-end reviews. Pro Tip for Clients: Maintain a petty cash log and reconcile it weekly to avoid surprises. Day 9: Nine Reconciliations The Reality: Reconciliation isn’t just a task—it’s an art. Matching every penny is satisfying, but it’s no small feat. Pro Tip for Clients: Submit complete and accurate records regularly so we can keep your books clean. Day 10: Ten Direct Debits Missing The Reality: Untracked or canceled direct debits can lead to unpaid bills, which impacts your credit and vendor relationships. Pro Tip for Clients: Set reminders to review direct debits monthly and update your payment methods when needed. Day 11: Eleven VAT Adjustments The Reality: VAT adjustments are tricky. They require precision and deep knowledge of tax laws. Pro Tip for Clients: Keep thorough records of VAT-related transactions. If you’re unsure, let us handle it. Day 12: Twelve Sleepless Nights The Reality: End-of-year madness leads to late nights for bookkeepers and accountants everywhere. Deadlines, reconciliations, and audits take their toll. Pro Tip for Clients: Early preparation and consistent record-keeping can save everyone from holiday burnout. Final Thought: Bookkeeping may seem mundane, but it’s the backbone of your business's financial health. By staying organized and working with a licensed bookkeeper, you can avoid the chaos of “12 sleepless nights.” Get in Touch: Need help with any of the "12 Days of Bookkeeping"? Contact CW Licensed Bookkeeper & Accountant at info@cwabc.co.uk or 07306 812321. Together, we’ll keep your finances merry and bright!
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