Since 2019, most VAT registered businesses with a taxable turnover above the VAT threshold (£85,000) have been required to keep digital VAT records and send VAT returns using Making Tax Digital (MTD) compatible software.
From April 2022 these requirements applied to all VAT registered businesses.
But there is more to come for MTD, with the launch date for MTD for Income Tax Self-Assessment (MTD ITSA) fast approaching.
From April 2024, self-employed individuals and landlords with an annual income of more than £10,000 per year will be subject to the rules of MTD ITSA. Exemptions include non-resident companies, trustees, executors and administrators, and foreign businesses of non-UK domiciled individuals.
What does MTD ITSA involve?
A quarterly summary of income and expenses must be sent to HMRC using MTD compatible software. HMRC will then respond with an estimated tax calculation based on the information provided. At the end of the year, tax affairs can be finalised using the MTD software, replacing the need for a Self-Assessment tax return.
The deadlines for finalising tax affairs and making payments are not changing. Self-employed individuals and landlords can use the MTD software to submit all the information required under Self-Assessment, including employment income, bank and building society interest, dividends, pension contributions, and student loan repayments, etc.
Are there any more key dates for MTD ITSA?
From April 2025, MTD for ITSA will apply to partnerships with income over £10,000 per year. Also in April 2025, the penalty system in place for MTD for VAT will also be extended to MTD for ITSA users.
It is thought that Making Tax Digital for Corporation Tax (MTD CT) will be introduced in April 2026, although there is no legislation in place as yet to mandate this, so we will await official confirmation.
Need help with Making Tax Digital?
There is a lot to prepare for if you will be subject to MTD ITSA rules from April 2024. If you could use some expert help preparing and managing the transition, you are welcome to talk to the Office Assistants Team.