Making Tax Digital for Income Tax (MTD) is a government programme to move self-employed businesses and landlords onto an entirely digital tax reporting system.
The aim is to improve accuracy and efficiency and make it easier for those completing Self Assessment returns to get their income tax right. Records of income and expenditure will have to be kept digitally and MTD-compatible software used to make quarterly reports to HM Revenue & Customs (HMRC).
Last year, due to the impact of the pandemic, the MTD programme was pushed back from its planned enforcement date of April 2023 to April 2024. Now, because of the current challenging economic environment and understanding that the transition to digital reporting will be a significant change for Self Assessment taxpayers, the government has amended its plans once again.
In her statement in December 2022, The Financial Secretary to the Treasury, Victoria Atkins, said: “It is right to take the time needed to work together to maximise those benefits of MTD for small business by implementing gradually. The government is therefore announcing more time to prepare, so that all businesses, self-employed individuals, and landlords within scope of MTD for Income Tax, but particularly those with the smallest incomes, can adapt to the new ways of working.”
What are the new changes?
The first significant change is the dates when MTD becomes mandatory: April 2026 for self-employed individuals and landlords with an income of more than £50,000, and April 2027 for those earning between £30,000 and £50,000.
The second big change is that only those earning over £30,000 will have to comply with the MTD rules – at least initially – whereas the original threshold was £10,000. Now, if your income is under £30,000, you will not be mandated to use the scheme until a review has been completed into how MTD can be shaped to meet the needs of smaller businesses and the best way for them to fulfil their tax obligations.
A live pilot is already up and running, so if you’d like to get ahead of the deadline and iron out any initial issues with using the software before it becomes mandatory, you can sign up now and start sending quarterly updates to HMRC.
VAT registered businesses
If your property business is registered for VAT, you should already be signed up to Making Tax Digital for VAT. And from now on, HMRC will automatically sign up businesses – there’s no need to do it yourself. Full information is available via the GOV.UK website.
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