Making Tax Digital for Income Tax Self Assessment

Following on from the successful rollout of MTD for VAT registered businesses, the next phase in HMRC’s 10 year strategy to build a trusted, modern tax administration system is to introduce those who have self-employment and/or property income to the Making tax Digital platform.

HMRC have estimated that there are 4 million non-registered traders that will fall under the scope to start submitting digitally from April 2023. From April 2023, any individual with trade or rental gross income over £10,000 will need to keep digital records and use HMRC approved software to submit quarterly updates to HMRC alongside an End of Period Submission (EPOS) followed by a Self Assessment tax return submission at the end of the year.

How do you know if this will affect you?

  • If you fall under any of the following categories, you are automatically in the scope for Making Tax Digital:
    • Sole trader
    • Landlord – with properties in the UK and Overseas
    • Partner in a Partnership
    • Any of the above with income at or above the threshold of £10,000
  • If you fall under any of the following categories you are exempt for Making Tax Digital:
    • Digitally excluded per HMRC guidance
    • Trusts
    • Estates
    • Trustees of registered pension scheme
    • Non-resident companies

What does that mean for you?

  • Digital record keeping – you will no longer be able to submit a ‘carrier bag’ full of information at the end of the year to be processed, this will have to be done on a quarterly basis and kept in a digital format
  • Regular tighter deadlines – you will have 30 days after the end of your quarter to submit your quarterly update (i.e. if your quarter ends 31 March, you have until 30 April to submit your update)
  • Additional costs – HMRC approved software and digital bridging software will of course come at a cost, however, this cost is tax deductible.
  • Quarterly estimation of tax – once you have submitted your quarterly update, HMRC will send back an estimated tax liability based on the information submitted, this will give you time to plan and prepare for any upcoming liabilities at the end of the year.
  • Multiple quarterly submissions – if you receive income from multiple sources, such as Sole Trade and UK Rental Income, you will have to submit each quarter for each income source

If you are concerned about how you will be affected by the implementation of Making Tax Digital for Income Tax Self Assessment and would like to speak to an advisor or book one of our no cost, no obligation meetings, please contact us via the website, emailing or calling 01482 427360.

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