Who will MTD for Income Tax affect?
MTD will affect businesses. By businesses HMRC means anyone that that runs an unincorporated business, including sole traders, people who are self employed and landlords.
What is MTD for income tax?
Making tax digital for income tax is part of the change that HMRC are making to how taxes are managed. Businesses (as defined above) will have to keep digital records and submit quarterly summaries to HMRC. The self-assessment return required for the end of each financial year will become an End of Year Submission.
How does it work?
Businesses will need to start keeping their financial records digitally and submissions need to be made using API enabled software. At this point in time there are not many software providers offering this, but as we get closer to the change there will be many different options to choose from. You can check the list of HMRC approved software providers here: https://www.gov.uk/guidance/find-software-thats-compatible-with-making-tax-digital-for-income-tax.
These quarterly summaries are not subject to compliance checks by HMRC but will be used for forecasting income tax figures. Once a quarterly submission has been made, if you find an error you can still change the data accordingly using the API enabled software and the change in data will be reported in your next summary.
Summaries must be submitted within 30 days of the end of the quarter. For example if your business’ financial year runs with the tax year from the 6th April to the 5th April then your first quarter will end on the 5th July and your submission will be due by the 5th August.
The deadline for the end of year submission will remain the same as the self-assessment deadline, the 31st January following the tax year end.
When will MTD for income tax be rolled out?
HMRC have not given a specific date for MTD for income tax going live yet. What they have said is that it will not go live before April 2020. It can be speculated that the go live date will depend on the success of the MTD for VAT which goes live April 2019, and the MTD for Income Tax pilot which is open now.
If you are interested in joining the pilot, please do get in touch and we can discuss this in detail and see if it is right for you.