Clear Books is here to help your practice prepare for Making Tax Digital. More businesses than ever before will be required to keep digital records and report more frequently to HMRC so it’s understandable that the approaching deadline can feel overwhelming. However, there are some things you can do to plan ahead and begin the groundwork for a smooth, headache free, transition.
What is MTD ITSA?
Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is the next step in the government’s plans to digitise record keeping and implement more frequent reporting for businesses in the UK. This follows Making Tax Digital for VAT which, as of March 2020, saw over 1.4 million businesses bring their accounting records online.
Which businesses will be affected by MTD ITSA?
HMRC has confirmed that MTD ITSA will apply to
- individuals who receive rental income; and
where the combined gross income from these sources exceeds £10,000 per year.
What will change for those businesses?
Businesses who fall within these parameters will be mandated to keep a digital store of their income and expense records, submit an MTD-compliant summary each quarter, and submit an MTD-complaint self assessment tax return to HMRC each year. Businesses and their tax agents will need to be compliant from the following dates:
- self employed and individuals who receive rental income from April 2024
- partnerships from April 2025
Three steps you can take today to make a smooth transition to MTD ITSA
1. Analyse and segment your client base
A key step in the preparation for MTD is to take an in depth look at your client base to determine who will be included and separate them based on a few different factors which will help you to put together a considered plan of attack.
Some important things to understand are:
- The core numbers – how many of your clients will be affected by MTD ITSA? How many of those are self employed/partnerships/have rental income?
- Current method of record keeping – Cloud software, desktop software, Excel or paper records? It’s likely that those keeping paper records or using Excel will need more of your focus to ensure they are educated on the changes ahead and to prepare them for the more rigorous reporting requirements
- Collaboration level – Rank your clients based on a combination of their capability and willingness, to accurately gauge the level of engagement each client should have with their accounts and help you choose the most appropriate solution for them
- Year ends – Each client’s reporting period will determine the point at which MTD is mandated for their business and, therefore, the ideal order to onboard them
2. Plan your timeline
After analysing your client base, you’ll be in the perfect position to put together a timeline for the run up to Making Tax Digital and make the next two years count. You should plan time to speak to your clients and select the subscription options that best fit their requirements.
With our free client training, we can help smooth the onboarding journey for clients and make it easier for you to get them ready for MTD. Catch up with your Clear Books account manager to arrange any client training, or to answer any questions about the onboarding process. Your timeline might look something like this:
While you might plan the core of your client onboarding a little bit further down the line, you shouldn’t be afraid to onboard any clients sooner, if they are ready to come online. The more you can get done in advance, the less work you’ll have as the deadline approaches. Work smarter not harder!
3. Get started today
There’s no denying that this next phase of Making Tax Digital presents a number of challenges to think about on top of your day to day processes. However, starting now will put your practice in a good position to face the changes head on and tackle MTD in simple, easy steps. The early bird catches the worm, after all…
It’s important that the extension of the MTD deadline doesn’t cause you to lose sight of the finish line. These additional 12 months provide the perfect opportunity to get your clients online early, leaving you with plenty of time to get them into the routine of providing their records more frequently, promote better bookkeeping practices and iron out any inefficiencies in your processes. This will ensure that when MTD ITSA is mandated, you’ll be cool, calm and in control, with minimal disruption to your practice.
Here to help
Clear Books is here to support you every step of the way and over the coming months we’ll be in touch with key updates, MTD guides, top tips and much more. If you’re not sure where to start, simply get in touch with a member of the Clear Books team who will be able to help you with a plan of action and answer any questions you may have. To get in touch, call 0800 862 0202.