Making Tax Digital for Income Tax
Making Tax Digital (MTD) was first talked about almost five years ago now by HMRC as they believe avoidable mistakes by the taxpayer is costing the Exchequer billions each year. In fact they have estimated this figure at £8.5 billion in the 2018/19 tax year alone.
MTD was originally meant to be introduced for Income Tax in April 2018 but due to the enormity of the challenge of ensuring there was access to suitable software for the taxpayer and development of HMRC’s back end systems this was indefinitely delayed. HMRC then moved their focus to MTD for VAT as VAT returns were already filed quarterly and a higher proportion of VAT registered business would already use software.
From April 2019 all VAT registered business with turnover greater than the £85,000 VAT threshold have been required comply with the VAT rules by keeping digital records and using software to submit their VAT returns.
Recently HMRC quietly announced the following plans for MTD:
- To make MTD for Income Tax mandatory from 6April 2023 for businesses and landlords with turnover in excess of £10,000.
- To mandate those business who are VAT registered but currently have turnover under the £85,000 threshold into the VAT regime from April 2022.
MTD for income tax will apply to the self-employed, partnerships and to those who receive income from property, with gross income from these sources combined above a threshold of £10,000. The draft legislation includes an exemption for the largest partnerships, defined as those with a turnover of more than £10m
Such businesses will be required to maintain their accounting records digitally in a software product or spreadsheet. Maintaining paper records will no longer meet the requirements of the tax legislation Information will have to be submitted quarterly to HMRC via the required digital platform and then finalise their tax position after the end of the tax year.
MHA Moore and Smalley offer a wide range of digital accounting solutions and support and training to our clients looking to change their accounting package, get more out of their current system or looking to install a computerised system for the first time.
For GP practices we are able to assist you to tailor your accounting software to ensure that it will be compatible for the MTD requirements and to ensure meaningful figures are available on a monthly or quarterly basis.