A new policy paper has been released by HM Revenue and Customs (HMRC) on Making Tax Digital for Income Tax Self Assessment for sole traders and landlords.
The new tax information and impact note supersedes the previous one and incorporates the changes in scope and timelines announced in December 2022, and other policy amendments and improvements made in the Autumn Statement 2023.
Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) revolves around requiring businesses and landlords to keep digital records and update HMRC each quarter using compatible software.
The policy paper outlines that MTD for ITSA will be introduced for sole traders and landlords in two phases:
- For those with qualifying income over £50,000, from April 2026.
- For those with qualifying income over £30,000, from April 2027.
The government plans to introduce MTD for ITSA for partnerships at a future time.
The government feel that MTD for ITSA will reduce tax errors, but if the introduction of MTD for ITSA affects you then it may mean making adjustments to the way you currently handle your accounting records. It may also mean keeping more up-to-date with bookkeeping because of the requirement to submit quarterly returns.
See:
Some self-employed taxpayers who filed their 2024/25 self-assessment tax return may have been incorrectly asked to pay class 2 national insurance contributions (NIC) on their SA302 tax calculation. HM Revenue & Customs (HMRC) has now confirmed that this issue has been fixed.
For many sole traders and small business owners, reviewing their accounting system only happens when something forces the issue. For instance, many sole traders are currently looking at whether their accounting system meets the requirements for Making Tax Digital for Income Tax.