Many micro-businesses and small-level landlords do their bookkeeping on Microsoft Excel or some other spreadsheet software. This works if the business is small and is required to undertake only low-level accounting tasks.
Investing in software can be time-consuming and expensive in such a case. However, detailed guidelines around data copying and pasting fall under the digital linking rules.
The whole point of MTD for ITSA is to remove the reliance on paperwork for accounting. Those using a book-based ledger or something similar must switch to accounting software or work with a bookkeeper or accountant who can do this for them. However, physical paperwork is almost impossible to avoid if running a business.
You may receive printed invoices or have clients that want you to send printed invoices. In either case, you should digitise the invoices as soon as possible so you are not sifting through piles of paperwork when the time comes.
With an accounting software solution, you can automate invoice payment reminders and handle admin on the fly – for instance, sending an invoice to a client from the mobile app. You cannot be that quick and efficient with your paperwork.
Deploying a dedicated software solution will help you comply with MTD for Income Tax Self Assessment faster. While MTD requires the self-employed and landlords to adapt to new technologies and methods, a robust accounting solution can make the transition smooth.
If you give HMRC accurate data in your periodic reports, you will always know where you stand regarding your tax position. You can share this with your accountant, so they will always have this insight.
Over to you
Frequently Asked Questions (FAQs)
1. When will MTD for ITSA be compulsory?
MTD for ITSA will become mandatory from 6 April 2024. Any sole trader or a landlord with a total business and/or property income above £10,000 per annum will have to comply with the new MTD rules.
2. Is there a delay in Making Tax Digital Phase 2?
Phase 2 is used in reference to the MTD for Income Tax Self Assessment go-live date, which is 6 April 2024. Initially scheduled to roll out in April 2023, the UK government extended the deadline by one year due to the COVID-19 pandemic.