Making Tax Digital for Income Tax Self Assessment (MTD ITSA) becomes mandatory for some from 2024. HMRC recently expanded the type of individual that can join the pilot. Who is now eligible?
Pilot
HMRC’s Making Tax Digital for Income Tax Self Assessment (MTD ITSA) pilot was initially intended to be for a very small number of individuals. However, it was later opened up following criticism by professional bodies. HMRC then committed to expanding the scope of the pilot so more types of individual could join. Unfortunately, because this didn’t happen until July 2022, it means switching to MTD ITSA part way through the tax year. Nonetheless, you should make eligible clients aware of the new criteria.
Pro advice. There are some advantages to joining the pilot. Clients will be able to try the system out without the risk of penalties for late returns.
Eligible. Under the expanded pilot, individuals will be able to join if their reportable items include:
- self-employment(s)
- UK property
- gift aid
- Pay As You Earn income, including pensions
- UK interest
UK dividends
Pro advice. If there are other items, the client will be excluded. For example, a sole trader subject to the high income child benefit charge will not be able to join. Businesses that don’t have an accounting year aligned with the tax year are also excluded.
Problems
A major problem with the pilot is that it requires your client to obtain MTD ITSA compliant software. However, there are currently only three providers offering this. None of the well-known providers are on the list, so it would probably mean changing. As this will have both financial and administrative consequences, it will be prudent for clients to wait until their current provider launches their compliant software.
Pro advice. HMRC has a dedicated guidance page on using MTD ITSA (see Follow up ), including a link on how to sign up.
The MTD ITSA pilot is now available to clients with wider sources of reportable items, including gift aid and PAYE income. However, signing up will probably require a change of software, which could be expensive and inconvenient.
The next step
This article has been reproduced by kind permission of Indicator – FL Memo Ltd. For details of their tax-saving products please visit www.indicator-flm.co.uk or call 01233 653500.