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However, now is the ideal time to get in place digital record-keeping software so you can start to benefit from the advantages digital solutions offer and so you are prepared for the eventual mandatory requirement to keep records digitally.

Following delays to the roll-out of Making Tax Digital for income tax self-assessment (MTD for ITSA), which will now undergo a phased implementation from April 2026, HMRC has opted to pause its pilot and reconsider the best way to oversee a successful trial for sole traders in the coming months.

Just 115 self-assessment taxpayers had signed up to last summer’s original pilot programme, which was paused in November 2022 prior to the announcement of the delayed implementation date.

HMRC has confirmed it will soon unveil a revamped pilot scheme to test the water for the UK’s self-employed community, which will be scheduled in line with the revised implementation timetable.

What is the threshold of Making Tax Digital for income tax self-assessment?

Following the Government’s confirmation in December 2022, MTD for ITSA will be applicable to sole traders earning over £50,000 per annum from April 2026.

From April 2027, Making Tax Digital for income tax self-assessment will then have a minimum reporting threshold of £30,000 per annum.

During both implementation periods, eligible sole traders must maintain digital records of income and expenses and submit quarterly updates to HMRC using approved accounting software.

There’s no time like the present to futureproof your bookkeeping

HMRC has also confirmed that self-employed professionals will be allowed to voluntarily enter Making Tax Digital for income tax self-assessment ahead of their mandated implementation date.

If the future is Making Tax Digital and a robust system of regular digital reporting, it doesn’t make sense to sit on your hands and wait until the last minute to adopt digital bookkeeping.

“Despite the revised implementation timetable, we highly recommend taxpayers embrace online accounting software as soon as possible,” said Andy Gibbs, Head of Group Technical at TaxAssist Accountants.

“Give yourself plenty of time to sample accounting software and find the one that works best for you. Ultimately, Making Tax Digital for income tax self-assessment is aimed at improving the efficiency of tax reporting and minimising the administrative burden on the self-employed.

“Accounting software can therefore help to realise time savings, allowing you to focus on doing what you do best – growing your business.”

At TaxAssist Accountants, we can guide you through this period of change with minimal upheaval to your small business. We can advise you on MTD for ITSA-compliant accounting software like Xero and QuickBooks. We’ll walk you through on all the core functionality to help make managing your accounting records easier, wherever you are.

To arrange a free, initial consultation on Making Tax Digital and digital bookkeeping software get in touch with us today on 0800 0523 555 or drop us a line using our online enquiry form.

Date published 16 May 2023

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