STOP PRESS (Jan 2023): Making Tax Digital for income tax self-assessment (MTD ITSA) has been delayed again – the new timescales are here. The benefits to going digital though, remain.
By Sarah Hardy
The phased introduction to the service is still on track, beginning with businesses, self-employed individuals, and landlords with a base income over £10,000 per annum (estimated to affect around 4 million taxpayers) unless there is an existing exemption from engagement with HMRC digitally, or if one is applied for and successfully granted
This is expected to be followed by rollouts across partnerships and Corporation Tax in future years too.
HMRC have experienced some internal system issues since they rolled the rest of the VAT systems over to the new Making Tax Digital platforms. They have needed to enhance aspects of the service to include necessary items not previously included (this is still a work in progress at this point), and with the currently instability globally there is always the possibility that they may be encouraged to defer the implementation of the MTD ITSA service, but this is by no means guaranteed.
It therefore may be useful for you to consider getting ahead of the game and starting to use the software available to have plenty of time to familiarise yourself with what’s needed and get into a good routine before it become a last minute panic to get up to date.
There are likely to be some initial additional costs to both businesses and individuals to set systems in place in order to comply with the MTD ITSA requirements, however there are many benefits that can be taken advantage of as part of this process too:
- Using cloud software allows easy access to records for both client and agent, helping with collaboration and strategic planning
- Bank, credit card, online marketplace activity can be directly fed into the cloud software eliminating manual data entry
- Some supplier accounts can be linked directly to the software (so it collects your purchase invoices electronically for you)
- Easily produce quotes and sales invoices, which can all be emailed directly to the customer or set in place regularly recurring invoices (e.g. for rental payments)
- Easily track income and expenses
- Pre-populate regular goods/services information by using partner software to help prepare your purchase documentation. It can also store electronic copies of records (so doing away with storage space issues for physical paperwork)
- Easy to keep up to date whilst on the move with simple to operate mobile apps
- Using other partner apps to aid credit control (users have seen income from customers arrive more quickly when linking a direct payment method to an emailed invoice),
- Manage property portfolios more easily with all documentation in one place and regular reminders set so renewals are less likely to be missed
- You can also track projects, run cashflow forecasts, and so much more too.
All of this enables you to keep an eye on the financial health of your business, helps you run things day-to-day, have forewarning of what your future tax outlays might be and helps decision making for big purchases of equipment, investments, loans etc. giving you greater peace of mind overall.
If you already have an agent in place they should be well placed to guide and advise you on how to put the systems in place for your particular business needs. If you do not yet have an agent it may be a good idea to engage with one well ahead of the deadline for implementation which will no doubt cause a surge in service demand which could leave you with little choice or support.
Get in touch to find out more about Making Tax Digital or self employment tax.