MTD for Income Tax Self Assessment

Making Tax Digital is changing the way businesses submit their Income Tax Self Assessment (ITSA) returns.

Making Tax Digital for ITSA explained

From April 2024, MTD for ITSA will apply to sole trade businesses and landlords with a total business or property income above £10,000 per year.

This will mean a change to the way your clients manage their tax obligations with HMRC.

Requirements of MTD for ITSA

Under MTD for ITSA, sole trade businesses and landlords will need to keep and maintain digital records and use MTD compatible software to manage, track and send updates to HMRC.

They'll be required to send HMRC quarterly summary updates of their business income and expenditure.

After the fourth quarter, an End Of Period Statement will need to be made to finalise each business income source. A Final Declaration will also need to be made, to include other sources of taxable income such as savings and investment income.

Before April 2024:

  • 1 annual submission
  • Paper filings by 31st Oct
  • Online filings by 31st Jan
  • Fine to keep paper records

After April 2024:

  • 4 quarterly submissions per business
  • 1 annual End of Period Statement per business
  • 1 annual ‘Final Declaration’ submission per individual
  • Filing via MTD-compliant software
  • Keeping digital records

Preparing your clients for MTD for ITSA

At Xero, we recognise that MTD for ITSA may feel like a big change to both your practice and your clients. Many of the businesses impacted by the change won’t be formally keeping records, and if they do, they’ll be kept only for the purpose of completing a Self Assessment tax return. Typically these will be your ‘shoe box’ clients who aren’t using software today, either because you’re doing the record keeping for them, or because they’re unable to find software that meets their needs.

Having your clients on bookkeeping software, rather than paper or spreadsheets, will make quarterly reporting far more efficient. It will also ensure clients are compliant with digital record keeping requirements .

Xero and MTD for ITSA

At Xero, we’re building an MTD for ITSA solution which we are testing with select customers from April 2022, as part of HMRC’s pilot.

Whilst we don’t expect all of our partners to want to adopt early, we will have a fully tested end-to-end solution well ahead of the 2024 deadline so that those who do want to be ready ahead of the deadline can do so.

We also recognise that, as an accountant or bookkeeper, you may be searching for an efficient way to manage this increased volume of reporting under MTD. As such, we’ll be adding features to support collaborative ways of working and proactive management of obligations and deadlines for you and your clients.

Our beta programme is live

At Xero we’re testing our MTD for ITSA solution ahead of time to make sure it helps advisors and businesses to stay on top of this new requirement as easily and efficiently as possible. This is called our ‘MTD for ITSA beta programme’. We’re really excited to kick off Xero’s MTD for ITSA beta and would love for you and your chosen clients to be part of the programme.

We're only testing with a select group of Xero accountants and bookkeepers at the moment and your feedback could help shape the development of the Xero product, as well as HMRC’s MTD for ITSA services. If you’re interested in joining Xero’s MTD for ITSA beta programme to test the solution, please get in touch with your Xero account manager today.

Explore our MTD for ITSA resource hub

We’ve created a Making Tax Digital for Income Tax resource hub to help you and your clients prepare for the new legislation. Explore our expert guides, articles and FAQs outlining everything you need to know about MTD for ITSA, from quarterly update obligations to how self assessment tax returns are changing .

Not ready for MTD yet? Use Xero Tax for personal tax today

In the meantime, accountants and bookkeepers can start the journey to being ready for MTD for ITSA by using Xero Tax. You can use it to prepare and file Self Assessment tax returns for your clients today.

Join Xero’s MTD for ITSA beta programme

Xero’s MTD for ITSA beta programme is one of the first HMRC-recognised software solutions available for Making Tax Digital for Income Tax.