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Making Tax Digital creeps on - October 23rd 2024

Self-employed individuals and landlords with turnover of more than £50,000 will have to report their income and expenditure to HMRC using Making Tax Digital (MTD) from April 2026. From April 2027, those with turnover above £30,000 will have to use MTD. Smaller businesses (under £30,000) will be able to sign up voluntarily.

These dates may seem a long way off, but MTD for Income Tax Self Assessment (MTD for ITSA) is a big change and you need to start preparing for it now. Businesses and landlords will have to use MTD compatible software to:

  • Keep digital records.
  • Submit summary income and expenditure quarterly.
  • Finalise business income at the end of the tax year and submit an End of Period Statement (EOPS) to HMRC adjusting and confirming previous summaries as needed.
  • Submit a final declaration to HMRC confirming any other income at the end of the tax year. HMRC will then confirm the tax you owe, payable by 31 January the following tax year.

The first step is to get accounting software that works with MTD and meets your precise needs. HMRC has published a list of compatible software available from commercial providers. Most VAT-registered businesses will already be using MTD-compliant software so only need to check that it can also deal with self-assessment.

Meeting different needs

  • HMRC has promised that taxpayers will be able to register more than one agent for MTD, such as a bookkeeper for quarterly updates and a tax agent for year-end filing.
  • Time limits for submissions will be enforced by a points-based penalty system, with one penalty point for each late submission and a financial penalty after a points threshold has been reached.
  • People who consider themselves digitally excluded – because of age, disability, location or another reason – will be able to apply for an exemption from using MTD

Further information on this topic can be found here.