Making Tax Digital for Income Tax – Get ready now!
The next big step in the Government’s Making Tax Digital (MTD) initiative is rapidly approaching.
From 6 April 2023, MTD is expanding to include businesses and landlords with a combined total gross income over £10,000 per annum, from the following sources:
- UK property
- overseas property.
The changes mean affected taxpayers will have to keep digital business records of all their business income and expenses, including their earnings from self-employment or property.
They must then use MTD compatible software to send updates to HMRC every quarter. This will mean that there will now effectively be five tax updates a year sent to the tax authority, instead of just one self-assessment tax return.
The deadline for this quarterly summary information is one month following the quarter-end.
At the end of the tax year, there will then be a final declaration made to HMRC to include details of all other income and any accounting adjustments.
Taxpayers will still be required to submit their final declaration by 31 January.
There are some exemptions to this next key stage of MTD, including:
- Trusts, estates, trustees of registered pension schemes and non-resident companies; and
- Partnerships that have corporate partners and Limited Liability Partnerships are not required to join MTD for Income Tax in April 2023 but will be required to join MTD at a future date.
As with the existing MTD for VAT rules, taxpayers will need to use HMRC compliant online accounting software to make these regular submissions.
It is important that those affected by these new rules take action sooner rather than later to get the correct systems and processes in place by seeking professional guidance and support.