Simplifying Making Tax Digital for accountants and bookkeepers

Making Tax Digital for Income Tax is a new way of reporting income and expenses which will replace the Self Assessment returns for sole traders and landlords.

It will require the taxpayer or their agent to:

• Use software that is compatible with Making Tax Digital for ITSA
• Keep digital records of business transactions
• Send quarterly updates to HMRC which summarise those business transactions. Separate quarterly updates will be required for UK property, foreign property and each of your self employments.
• Provide details of any tax and accounting adjustments and reliefs to finalise your taxable income from property and self-employment.
• Provide details of other income sources and other information such as tax allowances and reliefs you wish to utilise that would have previously been included on your self assessment tax return.
• Confirm the information you have provided is ‘complete’ by making a ‘Final Declaration’ by 31 January the following year

There are the upcoming dates to take note of:

• April 2026: MTD for Income Tax Self Assessment will apply if you have an annual self-employment and/or property income of more than £50,000
• April 2027: MTD for Income Tax Self Assessment will apply if you have an annual self-employment and/or property income of more than £30,000

There are also a number of future dates on the HMRC timeline to be confirmed for MTD for Income Tax Self Assessment:

• Sole traders and landlords with income under £30,000
• General Partnerships
• Limited Companies for Corporation Tax

HMRC have launched a ‘private beta’ for tax year 2024/25 and are currently encouraging agents to sign up, however it is also possible for taxpayers to sign up directly. 

To be eligible for private beta, you (or your client) must:

• Have a tax year that runs from 6 April to 5 April (or 1 April to 31 March if your software can support this)
• Ensure personal details are up-to-date with HMRC
• Be a UK resident
• Have a National Insurance number
• Have submitted at least one Self Assessment tax return
• Be up-to-date with tax records and payments

For more information on those that cannot sign up voluntarily and things to consider read our article https://www.sage.com/en-gb/blog/mtd-for-itsa/ 

First you’ll need to identify which clients are impacted by MTD for Income Tax and discuss these changes with every client. 

If you think a client would make a good candidate for the 2024/25 private beta testing, make sure to step them through the process and explain the implications of joining the voluntary programme.

Once you’ve talked them through it, make sure to get their consent. You will need this consent before you begin moving forward with the registration process below.

All agents need an Agent Services Account (ASA) to be able to access MTD services and make submissions on behalf of their clients. Think of this as similar to the Government Gateway login.

You will only need one ASA for your firm. Once you have one you can set up your staff with administrator or assistant logins to use the account.

Your firm may already have signed up for an ASA when you registered to submit MTD for VAT returns or Trust Registration Service returns.

The next step is to ensure you have compatible accounting software to be able to submit quarterly updates on behalf of your clients.

Sage Accounting is currently one of the few products on the HMRC list of approved providers that is ready to use right now if you wish to sign up clients for beta testing.

https://www.sage.com/en-gb/making-tax-digital/mtd-vat-software/ 

Once you have MTD compatible software you can sign up eligible clients for MTD for Income Tax. Here is the information you’ll need for the sign-up process:

• Client’s full name
• Date of birth
• National Insurance number
• Business start date or the date your client started receiving income
• Accounting method (cash or accrual basis)
• The tax year your client would like to start using MTD for Income Tax

Once completed you’ll need to provide the client’s authorisation.

You can do this either by signing in to the Agent Services Account and following the steps, or you can copy over the client’s existing authorisation for self assessment from your HMRC online services for agents account to the ASA.