What Is MTD ITSA, and How Will It Affect Self-Employed Individuals?
Chris White • January 17, 2025
What Is MTD ITSA, and How Will It Affect Self-Employed Individuals?
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:
- April 2026: Applies to self-employed individuals and landlords with an annual income exceeding £50,000.
- 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?
- Digital Record-Keeping
If you currently use spreadsheets or paper records, you’ll need to switch to MTD-compatible software to maintain digital records. - Quarterly Reporting
Instead of submitting one annual Self Assessment tax return, you’ll file four quarterly updates summarizing your income and expenses. - End-of-Year Submissions
You’ll still finalize your accounts at year-end, but the process will be streamlined with digital tools. - 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?
- Check if MTD ITSA Applies to You
Review your annual self-employment or rental income to determine when you’ll need to comply. - 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. - Organize Your Records
Ensure your income and expenses are up to date and transition from paper records to digital systems. - Learn the New Process
Understand how to submit quarterly updates, End of Period Statements, and the Final Declaration. - 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:
- Tailored Advice
We’ll help you understand how MTD ITSA impacts your specific situation and create a plan to ensure compliance. - Software Setup and Training
We’ll assist in choosing, setting up, and training you on the best MTD-compatible software for your needs. - Quarterly Reporting Support
Let us handle your quarterly updates to HMRC so you can focus on running your business. - Year-End Submissions
From the End of Period Statement to the Final Declaration, we’ll ensure your year-end reporting is accurate and timely. - Ongoing Support
We’re here to answer questions, provide troubleshooting, and keep you on track with MTD requirements.
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.
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Contact us today at
info@cwabc.co.uk
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Call us on
07306 812321
Let us help you prepare for the future of tax reporting!
Making Tax Digital for Income Tax is coming. Learn how CWABC can help you join the MTD testing phase, stay compliant, and simplify your taxes—stress-free.
Introduction The UK government has announced a major change in tax reporting rules that will benefit thousands of people earning extra income through side hustles. The threshold for filing a Self Assessment tax return is increasing from £1,000 to £3,000, meaning approximately 300,000 taxpayers will no longer need to submit a tax return. This change is designed to reduce administrative burdens and make it easier for individuals to manage their additional income. So, what does this mean for you if you have a side hustle? Let's break it down. Understanding the New Tax Rules Previously, if you earned more than £1,000 from self-employment or side activities, you were required to file a Self Assessment tax return. Under the new rule: Earnings up to £1,000 : No tax is due, and no reporting is necessary, thanks to the existing trading allowance. Earnings between £1,000 and £3,000 : You will owe tax on the amount exceeding £1,000. However, you will no longer need to file a full Self Assessment tax return. Instead, HMRC is introducing a simplified online system for reporting and paying tax. Earnings above £3,000 : A full Self Assessment tax return is still required. This change is part of the government's efforts to modernize HMRC and streamline tax reporting, particularly for people earning small amounts on the side. Who Benefits from This Change? This new threshold primarily benefits individuals with small-scale side hustles, including: Selling goods on platforms like eBay, Vinted, or Depop. Providing freelance services such as graphic design, writing, or tutoring. Working in the gig economy through platforms like Uber or Deliveroo. Renting out personal assets, such as through Airbnb. The government estimates that around 90,000 individuals within this group will owe no tax and therefore will not need to report their earnings at all. For those earning above £1,000 but below £3,000, the new simplified system will make tax payments easier and more efficient. Why the Government is Making This Change The government is aiming to reduce the administrative burden on both taxpayers and HMRC. By eliminating the need for thousands of small earners to file full tax returns, the new policy allows HMRC to focus its resources on higher earners and complex tax cases. Additionally, this move supports the growing gig economy, making it easier for individuals to supplement their income without being bogged down by paperwork. What You Need to Do If you have a side hustle, here’s what you should consider: Review Your Earnings : Determine whether your total income from side activities falls within the new thresholds. Understand Your Tax Liability : If you earn between £1,000 and £3,000, keep track of your income and expenses so you can accurately report your taxable earnings. Stay Updated : HMRC will introduce a new online reporting system for those earning between £1,000 and £3,000. Make sure you understand how to use it once it becomes available. Seek Professional Advice : If you’re unsure about your tax obligations, consulting a licensed bookkeeper or accountant can help ensure compliance and optimize your tax situation. Conclusion The increase in the Self Assessment threshold to £3,000 is great news for side hustlers across the UK. This change will reduce paperwork, simplify tax payments, and make it easier for individuals to earn extra income without the stress of unnecessary filings. However, tax rules can still be complex, and it’s essential to stay informed. If you have any questions or need assistance managing your finances, contact CW Licensed Bookkeeper & Accountant at info@cwabc.co.uk or call 07306 812321 for professional guidance.
Choosing the right accounting software is crucial for managing your business finances effectively. The right software can save you time, reduce errors, and provide valuable insights into your financial health. However, with so many options available, how do you know if the one you're using is truly the best fit for your needs? In this blog, we'll explore key signs that indicate whether your accounting software is helping or hindering your business. We'll also provide guidance on what features to look for and when it might be time to switch to a better solution. Signs Your Accounting Software Might Not Be the Right Fit If you’re experiencing any of the following issues, it might be time to reconsider your accounting software: 1. It’s Too Complicated or Too Basic Some software solutions are packed with features that small businesses may never use, making them overwhelming and difficult to navigate. On the other hand, some software may be too simplistic, lacking essential features like invoicing, tax reporting, or payroll. If you find yourself struggling to use the software or needing additional tools to compensate for its shortcomings, it’s a sign that it might not be the right fit. 2. It Doesn’t Integrate with Other Business Tools Your accounting software should work seamlessly with other tools like payment processors, inventory management, and customer relationship management (CRM) software. If you constantly have to enter data manually or use multiple platforms that don’t sync, it can lead to errors and wasted time. 3. Lack of Cloud Access or Mobile Usability In today’s digital world, cloud-based accounting software offers flexibility and accessibility from anywhere. If your software is limited to a desktop version or doesn’t provide a user-friendly mobile app, you might be missing out on efficiency and real-time access to your financial data. 4. Limited Reporting and Insights Good accounting software should provide reports that help you understand your business’s financial health. If your current software lacks detailed reporting features or makes it difficult to generate insights, you may be missing opportunities to make informed business decisions. 5. Poor Customer Support or Frequent Downtime If you frequently encounter technical issues and struggle to get support, this can be frustrating and disruptive. Reliable customer service is essential when dealing with financial matters, so if your software provider isn’t responsive or doesn’t offer adequate support, it may be time to switch. 6. Expensive and Unjustified Costs Many businesses start with affordable accounting software, but over time, hidden fees, additional feature costs, or price increases can make it more expensive than expected. If you're paying for features you don’t use or the cost outweighs the benefits, it’s worth considering a more cost-effective alternative. What Features Should Your Accounting Software Have? If you’re thinking about upgrading your accounting software, look for these essential features: Ease of Use – A user-friendly interface that doesn’t require extensive training. Automation – Features like automated invoicing, expense tracking, and tax calculations can save time. Integration – The ability to sync with your bank, payment gateways, payroll software, and other business tools. Scalability – Software that can grow with your business, allowing for additional users, advanced reporting, and new features as needed. Cloud-Based Access – The flexibility to access your finances from anywhere. Strong Security – Reliable data protection to keep your financial information safe. Affordable Pricing – Transparent pricing with no hidden fees. When Should You Switch Accounting Software? If you find that your current software isn’t meeting your needs, don’t wait too long to make a change. The best time to switch is usually at the end of a financial period (such as the end of the month, quarter, or year) to avoid major disruptions. Before switching, ensure you back up all data and carefully plan the transition. Final Thoughts Your accounting software should be an asset, not a hindrance. If it’s too complex, lacks key features, or is costing more than it’s worth, it might be time to explore other options. The right software will help streamline financial management, reduce errors, and give you better control over your business’s finances. If you need guidance on choosing the right accounting software for your business, feel free to contact CW Licensed Bookkeeper & Accountant at info@cwabc.co.uk or 07306 812321 for expert advice.
