What is Making Tax Digital for Income Tax all about?

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Having listened to stakeholder feedback from businesses and the accounting profession, the government have announced that they will introduce Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) a year later than planned, in the tax year beginning in April 2024.

This will give the self-employed and buy to let landlords an extra year to prepare for the digitalisation of Income Tax and also allow HMRC more time for customer testing of the pilot system.

The start date for partnerships to join MTD for ITSA has been put back still further to the tax year beginning in April 2025.

There has been no change to the £10,000 per annum gross income threshold which means that most self-employed traders and buy to let landlords will be mandated to comply with MTD for income tax from April 2024.

What does this mean for you?

  1. If your self employed turnover or rental income exceeds £10,000 in 2022/23 you will have to start filing quarterly tax returns from April 2024

2. Your accounting records will need to be kept using HMRC-approved software and quarterly returns will have to filed via that software

  • Speak to us if you’d like help and advice on setting up digital records. There are free and low-cost solutions available, or we can provide a comprehensive bookkeeping service to relieve you of this chore.

3. Income tax on quarterly profits will have to be paid each quarter too

4. If you don’t prepare accounts to 31 March or 30 April each year, you will need to change your year end to 5 April for the year commencing 6 April 2024. Your 2023/24 tax return will use accounts from the first day after the year end reported on your 2022/23 return up to 5 April 2024. For example:

  • If your accounts usually end on 30 April, your profits for 2023/24 will cover the period 1 May 2022 to 5 April 2024, which is 23 months! To compensate for this, you will have six years to pay the tax for that year.

5. You will still have to file an annual Self Assessment tax return after the end of the tax year, as you do now

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