Michael Lansdell counts down to Making Tax Digital
The deadline for Making Tax Digital for income tax self-assessment (more catchily known as MTD ITSA) is 18 months away, but not only will that time pass in a flash, getting ready now could save you a considerable amount of stress later on.
Following a limited pilot scheme, on April 6, 2023, more than four million taxpayers will join the MTD ITSA. You’ll no doubt be aware of its many opponents, particularly to the timetable. Despite this, HMRC claims that it will transform tax administration, making it more effective, efficient and easier for taxpayers, and one of the most digitally advanced systems in the world. Up-to-date digital records in real time will reduce the risk of errors and will help businesses and individuals manage their cash flow better, HMRC says.
Who will it apply to?
It will initially apply to landlords and self-employed people who have a total annual turnover exceeding £10,000. If you have trading and rental income that each individually amount to less than £10,000, but together total more than £10,000, you will not be excluded.
From April 6, 2023, regardless of when your current accounting period ends, you’ll need to record income and expenditure digitally. A quarterly summary of both will have to be sent to HMRC and a final annual declaration will replace the self-assessment tax return. A late filing penalty will not apply until four quarterly submissions are late.
If you still maintain paper records, you should move over to a cloud based bookkeeping solution as soon as possible to get ready for digital record keeping well ahead of the deadline. These will be your basis for filing. At the moment, there are only seven providers of suitable MTD ITSA software though – you’ll need compatible software to submit your updates – and there are no plans for the government to fund the increased cost of compliance with the new rules. If you’re still not sure how the changes could affect you, HMRC’s website is a rich source of information, or get in touch with the team at Figurit and we can support you with getting organised before the clock runs out.
For more information call Figurit (formerly known as Lansdell & Rose) on 020 7376 933.