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MTD for Income Tax Self Assessment (ITSA)

This section guides you through setting up and filing the required quarterly updates for your sole trade or property income.

1. Adding the Individual Income Source

If you have already completed the Onboarding screen, you will need to add the specific income source you are filing for.

  1. Navigate to Setup: From your dashboard, click the link to Add Business/Individual.

  2. Select Entity Type: Choose "Individual" as the type of entity you want to add.

  3. Enter Personal Details: Input your First name, Last name, and your UK National Insurance number (NINO).

    • Note: The NINO is essential for linking your profile to HMRC's ITSA records.

  4. Submit: Click "Submit" to save the individual income source.

2. HMRC Authorisation for ITSA

Before you can submit any data, you must give My Tax Digital permission to interact with your ITSA account on HMRC's system.

  1. Navigate to Authorisation: From the main menu, go to ITSA and then HMRC Authorisations.
  2. Start Authorisation: Click the "Authorise with HMRC" button next to the individual's name.
  3. Government Gateway: You will be securely redirected to the HMRC Government Gateway. Log in using the Government Gateway user ID and password that is enrolled for MTD for ITSA.
  4. Grant Permission: Review and confirm the authorisation request to allow My Tax Digital to act on your behalf.
  5. Confirmation: You will be redirected back to the app, and the status for that individual will change to "Authorised".

3. Setting Up Submission Preferences

Before submitting your first quarterly update, you must confirm your filing preferences.

  1. Access Settings: After authorisation, navigate to the Business Income section and select Edit for the individual/income source you are working on.
  2. Select Quarter Type (Standard vs. Calendar):
    • Standard Quarter: This follows the tax year (6 April to 5 April) and is the default (e.g., 6 April to 5 July).
    • Calendar Quarter: This aligns with the calendar months (e.g., 1 April to 30 June).
    • Select your preferred option in the settings. This setting determines the dates the app uses for your quarterly periods.
  3. Select Submission Mode (Bridging vs. Accounting):
    • Accounting Mode: Select this if you intend to keep all your detailed transaction records in My Tax Digital's Transactions section. The app will automatically calculate the quarterly totals for you.
    • Bridging Mode (Digital Links): Select this if you use an external spreadsheet or simple software to track your records. You will manually import the summarised figures for each quarter.

4. Submitting a Periodic Cumulative Update

MTD for ITSA requires you to submit four updates per year. These updates are cumulative, meaning each submission includes the total income and expenses from the start of the tax year up to the end of that specific quarter.

  1. View Obligations: Navigate to Obligations in the ITSA menu to see your upcoming submission deadlines.
  2. Select Open Obligation: Find the earliest Open quarterly deadline you wish to submit and click the "Submit" or "View Update" button next to it.
  3. Review or Import Figures:
    • Accounting Mode: The cumulative figures for your income and expense categories will be automatically populated from your digital records in the app.
    • Bridging Mode: You will be prompted to import a CSV file containing the cumulative income and expense totals for the current period.
  4. Make Corrections: If you discover an error in a previous quarter's figure, you can correct it directly in your digital records (Transactions) or include the correction in the current cumulative total being submitted.
  5. Final Submission: Review the final cumulative figures being sent for each category. Click the "Submit to HMRC" button.
    • Note: You do not make tax adjustments at this stage; this is simply a summary of your income and expenses.
  6. Confirmation: The obligation status will change to Fulfilled.

The screens listed below are part of the 'Manage' section of the ITSA dashboard and are primarily used after your fourth quarterly update to finalise your income and complete the annual tax return process.

Other ITSA Screens (Annual Finalisation)

The following sections allow you to perform year-end adjustments, declare other non-business income, and manage any business losses.

Adjust Income & Expenses

This screen is used to correct any cumulative income or expense totals that you submitted in your earlier quarterly updates.

  1. Access Adjustment: Select the Adjust Income & Expenses tile from the ITSA dashboard.

  2. Select Period: Choose the specific Tax Year you need to adjust.

  3. Review Totals: The screen will display the cumulative annual total for each income and expense category based on the four quarterly updates you previously filed.

    • Note: Since the quarterly updates are cumulative, correcting an error in a previous quarter will affect the figures here.

  4. Enter Corrected Figures: If you find an error (e.g., you missed an invoice or wrongly categorised an expense), you can override the automatically calculated total for the relevant category and enter the correct, final annual figure.

  5. Submit Adjustment: Click "Submit Adjustment". This sends the updated annual totals for that income source to HMRC, ensuring your total profit calculation is accurate before proceeding to the final declaration.

Adjustments & Allowances

This is a critical year-end screen used to apply tax and accounting rules that are not included in the quarterly updates.

  1. Access Screen: Select the Adjustments & Allowances tile from the ITSA dashboard.

  2. Make Accounting Adjustments: If you are using the traditional (accrual) basis of accounting, you will enter amounts here for items like:

    • Prepayments: Paying an expense that relates to a future tax year (e.g., insurance paid in advance).
    • Accruals: An expense that was incurred but not yet paid or invoiced by the tax year end.

  3. Claim Tax Allowances: Enter your claims for tax reliefs that reduce your profit, such as:

    • Capital Allowances: Claims for qualifying business assets (e.g., equipment, vehicles).
    • Disallowable Expenses: Deduct any expenses that are not allowable for tax (e.g., personal use portion of a phone bill, entertainment).
    • Rent a Room Relief: If applicable, claim the tax-free allowance for letting furnished accommodation in your own home.

  4. Finalise: Click "Save and Proceed". The system uses these figures to finalise the statutory taxable profit or loss for the income source.

Brought Forward Losses

This screen tracks and applies any tax losses carried over from previous tax years to reduce your current year's tax bill.

  1. View Brought Forward Loss: Select the Brought Forward Losses tile. The screen will display any unused losses from earlier tax years that are available to be used now.

  2. Apply Loss: The system will automatically, or prompt you to, apply any eligible brought forward losses against the current year's taxable profit for the same trade.

  3. Update Balance: Once applied, the remaining available loss to be carried forward to future years is updated.

Loss Claims

This screen allows you to make claims for losses incurred during the current tax year against other income (known as 'sideways relief').

  1. Identify Current Loss: Ensure your Adjustments & Allowances screen has confirmed a trading or property loss for the current tax year.

  2. Claim Relief: Select the Loss Claims tile. You can then specify how you wish to use the loss:

    • Sideways Relief: Claim to set the loss against your other sources of income (e.g., employment, dividends) from the current year, subject to HMRC caps.
    • Carry Forward: Choose to carry the loss forward to be used against profits of the same trade in future tax years.

  3. Submit Claim: Click "Submit Loss Claim" to inform HMRC of your intention to use the loss in the specified manner.

Tax Calculations

The Tax Calculations section allows you to view an estimate of your Income Tax and National Insurance liability at various points throughout the year. This gives you a better idea of how much tax you may owe before the annual filing deadline.

This calculation is an estimate based on the information submitted to HMRC so far. It should not be treated as your final tax bill.

  1. Navigate to Tax Calculations: From the ITSA menu for your chosen income source, click on Tax Calculations.

  2. Trigger a New Calculation: To get the latest estimate based on your most recent quarterly update and any adjustments:

    • Click the blue "Trigger" button located in the top-right corner of the Tax Calculations screen.

  3. View Calculation History: The main Tax Calculations screen displays a history of all previously requested estimates, showing the period, the creation date, and the type of calculation requested (e.g., In year, Intent to Finalise, Final Declaration).

  4. Review the Calculation Details: Click on any calculation in the list to view the full detailed breakdown.

    • Overview: Shows the tax year, the period covered, and the request details.
    • Messages: This section will flag any important Info, Warnings, or Errors returned by HMRC that could affect the accuracy of the calculation.
      • Example Warning: You may need to provide further information during the final declaration.
      • Example Error: You have not provided final confirmation of income and expenses for all business sources.
    • Inputs: Lists all the financial information used to create the estimate (e.g., personal information, income sources, allowances, losses, claims).
    • Calculation: Provides the estimated results, including the breakdown of:
      • Taxable event gain income
      • Pension profit
      • Student loans
      • Total Income Tax and National Insurance due

Final Declarations

The Final Declarations screen is the final step in the MTD for ITSA process and takes place once a tax year has ended (after 5 April). This declaration replaces the old annual Self Assessment tax return.

Purpose of the Final Declaration

The Final Declaration is your annual chance to tell HMRC about all your income and apply all personal allowances, reliefs, and finalise your tax calculation.

It includes:

  • The business and property figures that were finalised in the Adjustments & Allowances screen.
  • Any non-mandated income (e.g., employment, dividends, savings interest).
  • Any personal claims or reliefs.

  1. View Open Declarations: From the ITSA menu, click on Final Declarations. This screen displays a list of tax years for which a declaration is due. An "Open" status means the final submission for that year has not yet been filed with HMRC.

  2. Select Declaration: Click on the required period (e.g., 06/04/18 - 05/04/19) to begin the finalisation process.

  3. Review and Add Information: Before submitting, the app will guide you through sections to ensure all your income is accounted for:

    • Business Income: Confirms the final profit/loss figures that were determined using the Adjustments & Allowances screen for all your self-employment and property sources.
    • Additional Information: This is where you declare any non-mandated income that was not included in the quarterly updates, such as:
      • Employment (P60/P45) income
      • Savings and interest income
      • Dividends
      • Capital Gains
      • Pension income
    • Tax Calculations: Use this screen to run a final, definitive tax estimate before submission.

  4. Confirm and Submit: Once all income, allowances, and reliefs have been entered and the tax calculation has been reviewed, you will make the final legal declaration.

    • Click the "Submit Final Declaration" button (usually found on the review page).
    • The status of the tax year will change from "Open" to "Fulfilled," confirming the completion of your MTD ITSA requirements for that period.

Note: Once the Final Declaration is submitted, any further changes (amendments) must typically be filed separately, although the app supports amending previous submissions via the Tax Calculations screen.