Making Tax Digital is HMRC’s vision to digitalise the tax system in the UK.
The next phase of MTD is to require the self-employed and landlords to file quarterly returns with HMRC.
From April 2024 HMRC will require the self-employed with a turnover above £10,000 and those with property income above £10,000 to file a quarterly return to HMRC via MTD compatible software, such as Xero.
The quarterly return will consist of details of the business’s income and expenses, and will enable HMRC to provide you with an estimate of your tax liability.
For now, you will still need to file a self-assessment tax return by 31 January following previous 5 April tax year end as normal.
This is a big change for the self-employed and landlords and could cause a lot of additional admin.
Assess if your self-employed turnover, or gross rentals if you are a landlord are over £10,000 per year
Prepare for MTD for self-employed and landlords in plenty of time, get used to the software and the process at least three months before
Speak to your accountant about cloud software and how cloud accounting can alleviate the additional admin that is being put on small businesses and their owners
Timeline of MTD:
April 2019 – all VAT registered businesses with a turnover of greater than £85,000 are required to file VAT returns using MTD compatible software
April 2022 – all VAT registered businesses, regardless of turnover are required to file VAT returns using MTD compatible software
April 2024 – MTD Income Tax Self-Assessment (MTD ITSA) will be introduced. Requiring the self-employed and those with income from property with turnover from self-employment or gross rental income over £10,000 to file quarterly returns with HMRC
April 2025 – MTD ITSA will be introduced for partnerships, with partnerships of income over £10,000 being required to file quarterly returns with HMRC
April 2026 – earliest date that MTD for Limited companies will be introduced, requiring Limited companies to file quarterly returns to HMRC for corporation tax purposes