Making Tax Digital (MTD) for Income Tax FAQ
From April 2024 making tax digital is going to be introduced, increasing the reporting requirements for the majority of businesses and landlords.
What is Making Tax Digital (MTD)?
MTD is a government programme which intends to use technology to remove many of the existing paper-based processes in order to make tax more efficient and easier for taxpayers to get their tax right. MTD was first introduced in 2019 for VAT and will soon be extended to include businesses and landlords.
Will Making Tax Digital affect me?
If you are self-employed or a landlord with a total gross income of over £10,000 then MTD will apply to you from April 2024. The rules will also apply to most partnerships from 2025.
How will Making Tax Digital affect me?
MTD requires individuals to file quarterly returns, to report a summary of their income and expenditure. Individuals will have 30 days from the end of the quarter to file this return and HMRC will charge penalties to anyone who misses these deadlines. The size of these penalties are still to be confirmed, however they are likely to follow existing late filing penalties of £100 immediately following the deadline. If a business which signs up to MTD for income tax has no other income to provide (such as employment income or bank interest) they will not need to file a separate self-assessment tax return.
What do I need to do to be ready for Making Tax Digital in April 2024?
It is a requirement for MTD to keep your business records digitally. For many of our clients who use Xero, we will be able to file your MTD returns through this software. If you use other software, it will need to be checked whether it supports MTD filing from April 2024. A list of software which supports MTD can be found on the GOV.UK website. It is important that businesses and landlords keep their digital information up to date so that these quarterly returns are an accurate representation of the business’s performance over the previous quarter.
Does this mean I will need to pay my tax quarterly?
No, the payment deadline for income tax will still be 31st January following the end of the tax year. If you are required to make a payment on account this will still be paid by 31st July, as per the existing rules. MTD may allow us to make more accurate estimations of your tax liability and as a result we may be able to adjust your payments on account if your income has fallen.
If you have any questions or queries regarding MTD, then please contact us using our details below.
Call us on 01908 219100 or drop us an email on enquiries@advaloremgroup.uk
