Self employed businesses and landlords across the UK face a challenging time ahead, as the Government continues to implement its Making Tax Digital initiative.
This landmark change in the recording and reporting of tax will gradually see the major components of taxation taken online, using the latest HM Revenue & Customs-compliant software, apps and programs.
Taxpayers must be fully prepared for these changes, as they could face fines of penalties if they do not comply in future.
Below are the key dates for Making Tax Digital to help you track your journey and ensure you are compliant with the changes ahead.
We know there is a lot to consider in the coming years, which is why our team have prepared a helpful guide, which is packed with information on the various stages of Making Tax Digital and what you may need to report.
While the deadlines for the various stages of Making Tax Digital may seem some way off, the changes required to comply with this new tax system are complex and onerous.
Businesses and taxpayers may need to invest in new technology, such as cloud accounting software, and alter their method of recording and reporting accounts and tax information.
We have already helped a wide range of businesses with the initial stages of Making Tax Digital and can assist you by putting the necessary software, apps and procedures in place.
To arrange an initial Making Tax Digital consultation with our team, please contact us.
MTD FOR INCOME TAX – WHAT WE KNOW SO FAR
- MTD for VAT – compulsory since 2019
- ‘Soft landing period’ ended on 1 April 2021
- VAT registered businesses with a turnover below the VAT threshold required to follow MTD rules from 1 April 2022
- MTD for Income Tax starts from April 2023
- MTD for Corporation Tax will not be introduced before 2026
- Landlords – UK and overseas property income
- Sole traders
- Residents and non-residents
Existing sources of income:
- Trading income – start of first accounting period starting on or after 6 April 2023
- Property income – 6 April 2023
New sources of income starting on or after 6 April 2023
- Trading income – start of accounting period in tax year three
- Property income – 6 April following the start date
- Exempt for now
- Partnerships with a corporate partner
- Exempt indefinitely
- Digitally excluded
- Trustees of registered pension scheme
- Non-resident companies
- Income from self-employment (separating out trades)
- Income from partnership (reported at partnership level)
- Income from UK property (split into Furnished Holding Lettings and other)
- Income from overseas property
MTD for Income Tax applies if the total gross income from these sources combined exceeds £10,000
Other income will be reported annually via MTD enabled software
- Maintain digital records at a transactional level
- Digital links between transaction records to tax submissions
- Submissions to HMRC via API enabled software
- Submit summary information to HMRC through quarterly updates
- Submit end of period statement to HMRC
- HMRC will issue an ‘update notice’
- Submit a summary of the last three months information in specified categories
- Accounting adjustments and claims are optional
- Deadline one month following quarter end
- Can submit up to ten days early if no further transactions are expected
- No declaration or inaccuracy penalty
- Separate updates for each MTD income source
- EOPS finalises the figures – one for each MTD income source
- HMRC will issue an ‘End of Period Statement’ notice
- Report missing transactions, corrections and accounting adjustments
- Claim reliefs, allowances, losses etc
- EOPS for a partnership is a full partnership return
- Includes a declaration
- Deadline (almost) the same as the self-assessment deadline
- Finalise the liability for the individual for the tax year
- Bring together all MTD income sources and other income