My previously published blog gave a background to making tax digital (MTD). MTD is HMRC’s initiative to “move toward a modern, digital tax service” and in effect, digitalise the entire tax system.
It could be argued that the first step towards digitalisation was PAYE’s real time inforamation (RTI) submission.
Digitalisation of Payroll Submission – This took the form of RTI submissions from 5 April 2013. Employers were required to submit real time information (which included a full payment submission – FPS and employers’ payment summary – EPS, each time employees were paid; and earlier year update – EYU, where changes to prior year submission was required). The change in this case was to frequency of submission and how payroll submissions were made to HMRC. Some will argue that this was either HMRC’s trial run or perhaps the incubator of the idea to digitalise the tax system.
Then came the first stage of the 10-year digitalisation initiative, making tax digital for VAT (MTD for VAT)
MTD for VAT – This came into full effect for submissions for periods starting 1 April 2022 onward. All businesses registered for VAT must maintain digital records and submit returns digitally using compatible software. Note in this case, the change is to how the submission is made and how records are maintained.
The next step in the digitalisation of the tax system is MTD for ITSA.
MTD for ITSA – As explained in previous blog on same topic, MTD for ITSA is set to take effect in April 2024. It becomes mandatory for 6 April 2024. MTD for ITSA represents a significant change to self-assessment tax return. Unlike the digitalisation of the payroll submission and MTD for VAT, this involves a change to how the reports are submitted (i.e., digitally using compatible software), the frequency of submissions (quarterly, and an additional two submissions i.e. 6 submission per year) and how records are maintained (digitally, like MTD for VAT).
Note that the frequency of submission in the case of RTI affected employers but with MTD for ITSA, it affects business owners.
Check out our resource page for infographics on other aspects of MTD for ITSA.
Contact hello@bancservices.co.uk with questions about getting ready for MTD for ITSA