Making Tax Digital for Income Tax (MTDIT) is a new way of reporting income to HMRC. You’ll use software compatible with Making Tax Digital to keep digital records and send Income Tax updates instead of sending a Self Assessment tax return.
Self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for Making Tax Digital for Income Tax from 6 April 2024. Most partnerships will join the regime one year later, from 6 April 2025.
The detailed rules that people will have to follow have not yet been published, but in summary taxpayers will have to:
record business transactions in a digital manner;
preserve those records for the defined period;
provide a quarterly update to HMRC; and
provide an end of period statement (EOPS) to HMRC.
The records in 1) and 2) comprise data needed to populate the reports required for points 3) and 4), which in turn must be submitted using MTD-compatible software.
The digital means for recording the data does not have to be the same software that submits the data. However, there should be a digital link between the recording software and the submission software.
Scholes CA will be monitoring developments in the legislation and will be providing appropriate support to clients to ensure compliance with the new rules. If you have a question about how MTDIT may impact your business or property activities, get in touch today.
HMRC MTDIT Pilot Programme - HMRC is operating a limited pilot programme that some taxpayers can join now. Get the details here.
Making Tax Digital - Government policy - MTDIT forms just one strand of a broader government initiative designed to digitise a range of UK taxes, including VAT and Corporation Tax. For an overview of the wider MTD programme see here.
1 July 22 - the government today published draft legislation providing some further clarity on the reporting requirements under the new regime. Businesses with annual turnover below the VAT registration threshold (currently £85,000 until 31 March 2024) will be asked to submit only two figures to HMRC in the quarterly updates. There are five different types of quarterly updates, depending on the type of business a taxpayer is conducting:
- Businesses with trade profits;
- Businesses with property income (not UK or EEA furnished holiday lets (FHL));
- Overseas property (not EEA FHL) ;
- FHL in the UK; and
- FHL in the EEA.
Contact Scholes CA
Contact us for assistance with transitioning your business to MTDIT.