The introduction of Making Tax Digital (MTD) has been delayed until 2026.
What is MTD
Making Tax Digital is an initiative introduced by HMRC in an attempt to modernise our tax system in the digital age.
MTD for ITSA (Income Tax & Self-Assessment) comes into effect from April 2026 (previously 2024) if your “qualifying income” is above £50,000. April 2027 if you have an annual business or property income of more than £30,000. Consultations will now be held between now and 2026 to see what are the needs of businesses below turnover of £30,000.
You will need to keep digital records and make quarterly filings using a compatible software. You will then be required to submit an annual update called end of period statement. The deadline for this will follow the current self-assessment deadline of 31st January.
Income that is not “qualifying income” will also need to be reported to HMRC via the MTD compatible software or directly via the HMRC online service.
The period often referred to as “basis period” will need to align with the tax year so a year end 31st March or 5th April. If you need to change your basis period this must be done by April 2024.
What income to report under MTD
HMRC has now published detailed guidance on what counts as MTD qualifying income. Their guidance says that “qualifying income” is the combined income that you get in a tax year from Self – Employment and Property Income.
Income from other sources such as PAYE income, dividends, interest, and savings do not count towards the “qualifying income”.
Anyone who is resident outside of the UK would only have to include UK based earnings. But income remitted to the UK by a Non-Dom person and paying tax on remittance basis is excluded.
If you have UK domiciliary, your foreign self-employment or property income will count towards your “qualifying income”.
As partnerships will be caught separately a year later, any income from partnerships do not count towards your “qualifying income”.
Also, worth noting is if you start self-employment or become a landlord after 6th April 2023 then you do not have to comply with MTD until you have submitted your first self-assessment tax return.
What reports do I need to submit under MTD
As mentioned above you will need to keep your business and property records using cloud accounting software. Every business will be required to file it’s own reports regardless of whether there is a same owner for multiple businesses.
Before submitting the end of period statement it will be possible to make amendments for accounting adjustments (like depreciation) and tax adjustments including allowances and reliefs.
How can we help?
If you need help in this area and would like to talk to someone, please call your normal manager at Myers Clark. Alternatively email Priya at email@example.com.
We can recommend what cloud software to adopt and how the duties can be divided between you and us so you are only doing what you can. The recent HMRC clarifications mean that we are going ahead with this so it is time to start planning.