Who Does Making Tax Digital for Income Tax for Self-Assessment Affect?
You’ll need to sign up for MTD ITSA if:
● You’re an unincorporated business or a landlord
● Your total gross income is more than £10,000 a year from your self-employed income and/or rental properties
Here’s a couple of scenarios to show you what we mean.
Scenario 1: If you own and operate three businesses, each with an income of £4,000, you will be eligible for Making Tax Digital and will need to register for MTD for ITSA.
Scenario 2: If you own and operated a single business with an income of £7,000 and then had an extra income of £4,000 from a property you let, you will need to use MTD for ITSA.
Who is exempt?
At present, you’ll be exempt if you:
● You are in a partnership with any partners who are not individuals
● You are in an LP or LLP
● You make your Self Assessment money from trusts or deceased estates
● You earn less than £10,000 taxable income
At the moment, these exemptions are temporary until HMRC aims to roll out Making Tax Digital to cover all areas of the tax system.
Any other exemptions?
Well, there are provisions for being considered digitally exempt, but these only apply in very limited circumstances.
If you think this applies to you, please apply for exemption to HMRC, which is only granted in some circumstances.
Each application is reviewed on an individual basis.
What’s the Making Tax Digital for Income Tax for Self-Assessment threshold?
Under the current rules, you must sign up for Self Assessment if you’re a partner in a business partnership, a landlord or a self-employed sole trader.
While all partners must complete a return, sole traders and/or landlords only need to if their annual turnover is higher than £1,000.
Others who may need to sign up to complete a Self Assessment are those with other untaxed income, such as:
● Those with income from tips and commissions
● Those with income from savings, investments and dividends
● Those with untaxed foreign income
Not everyone who currently uses Self Assessment will be included in MTD ITSA from April 2024.
The scheme will only cover you if you are an unincorporated business or a landlord with a qualifying income of £10,000 or more.
You can use the gov.uk guide to see if you qualify.
Note: The £10,000 threshold refers to your gross income from all businesses and/or rental properties. You will still be eligible for MTD ITSA even if none of your individual sources of gross income generates you £10,000 or more in any given year.
