Making Tax Digital (MTD) For Income Tax
Making Tax Digital (MTD) for Income Tax is coming up in near future. Making Tax Digital (MTD) will fundamentally change the way businesses, the self-employed and landlords interact with HMRC.
Making Tax Digital rules apply to the following:
- A UK resident;
- One who is registered for Self Assessment and their returns and payments are up to date;
- One who is sole trader with income from one business only or a landlord who rents out UK property (or both).
The regime started in April 2019 for VAT purposes but only for VAT registered businesses with a turnover above the VAT threshold. The further rollout of MTD will start in April 2022 when MTD will be extended to all VAT registered businesses with turnover below the VAT threshold of £85,000. https://www.gov.uk/government/collections/MTD-for-vat
This will be followed one year later, from 6 April 2023, when MTD for Income Tax is introduced. The rules will apply to taxpayers who file income tax self-assessment tax returns for business or property income over £10,000 annually.
Some businesses and agents are already keeping digital records and providing updates to HMRC as part of a live pilot to test and develop the MTD service for Income Tax. Under the pilot, qualifying landlords and sole traders (or their agents) can use software to keep digital records and send Income Tax updates instead of filing a Self-Assessment tax return.
Every 3 months users will electronically send a summary of their business income and expenses to HMRC. At the end of their accounting period, users will need to finalise their business income and expenses and submit a final declaration (replacing the Self-Assessment tax return). This is where you will also be able to submit information about any personal income and claim reliefs.