Making Tax Digital for income tax
The way in which Self Assessment Tax Returns are filed is set for some big changes. From April 2024, HMRC will be rolling out Making Tax Digital for income tax self assessment, or MTD for ITSA.
For those of you who haven't heard of MTD before, this is a UK Government programme that is gradually being rolled out through the tax system and it require all businesses and taxpayers to maintain their accounting records digitally and use software to submit and file any data to HMRC.
MTD for VAT has been up and running since April 2019 and is now scheduled to be extended to businesses and landlords that submit Self Assessment Tax Returns. It is also planned to be extended to Corporation Tax at a later date.
Whilst April 2024 may sound like a long way off, it will soon be here so now is the best time to build the foundations and get everything into place.
If you currently submit a Self Assessment Tax Return you will need to ensure that you (or your bookkeeper) are keeping digital records of all business or property income and expenses, and that you are using a software that is compatible with MTD.
Self Assessment Tax Returns are currently submitted annually, however once MTD comes into place HMRC will require a quarterly update which is filed directly from your accounting software. At the end of your accounting period you will also submit a declaration of your final figures and any other personal income or tax reliefs.
If you're not already using a cloud accounting software I would recommend that you look into setting this up soon as this is the simplest way of ensuring you are complying with MTD ahead of the deadline. I use Xero and QuickBooks and can set up and manage your software from the start.
Feel free to get in touch if you have any queries or questions around this topic.