What is Making Tax Digital for Income Tax?
The next round of MTD that’s set to come into force is Making Tax Digital for Income Tax Self Assessment, or MTD for ITSA. It’s due to be rolled out in 2024, so you still have a bit of time to prepare.
Using accounting software
Like with MTD for VAT, under MTD for ITSA you’ll be required to keep all of your financial records digitally, using MTD-compatible software. This means that you’ll need to keep records of all of the amounts you receive from clients and the expenses you pay out for your business. Some software solutions will let you connect to your bank accounts so that transactions can be imported and sorted in one place.
If you’re looking for an easy-to-use app to simplify your freelance admin, you might want to give Coconut a try. It’s a simple tax app built to help busy freelancers stop wasting time on bookkeeping and focus on what’s important instead.
Using Coconut, you can connect your bank accounts so that transactions are automatically imported, and scan and save expense receipts on the go, so you never miss out on claiming a business expense. If you work with an accountant, you can invite them to see your account activity in just a few taps, which will make both of your lives easier.
We’re also working hard to be compatible with MTD for ITSA by the time it comes into effect in April 2024. Want to get a head start? Sign up for a no-strings-attached, 30-day free trial.
New reporting requirements
Another significant change brought in by MTD ITSA is that, from 2024, you’ll have to submit four reports of your income and expenses to HMRC, instead of just one tax return. You’ll also have to submit a final statement at the end of the year to confirm the information you’ve given them.
While this might sound like a lot of extra work, the reality is that your accounting software will do a lot of the heavy lifting for you. As you’ll be recording details of all transactions completed throughout the quarter, it’ll be a matter of just a few taps to get your reports submitted when the time comes around. Plus, you’ll get a running total of how much tax you’ll owe at the end of the year, so there’ll be no more nasty surprises come tax time.
Learn more about Making Tax Digital for Income Tax.