News
Making Tax Digital (MTD) for Income Tax
12 - 08 - 2024
MTD
for Income Tax is due to start being phased in from April 2026.
MTD
means that affected taxpayers will need to file returns with HMRC on a
quarterly basis. HMRC are still in the process of developing a MTD system and
Foremans are developing and adapting software to process the returns. We will
be in a position to report to HMRC under MTD as the deadline is implemented.
What is Making
Tax Digital (MTD)?
MTD is the HMRC’s intention for all UK taxes to be filed online with HMRC using digital software.
VAT
MTD is already in operation. As of June 2022 all VAT registered businesses
should be reporting their VAT through MTD software unless there are very
exceptional circumstances. Foremans are filing all clients VAT through
compliant MTD software.
The
next stage is to introduce MTD to Income Tax Self Assessment initially for the
Self Employed and Landlords.
When is MTD for
Income Tax Self Assessment to be implemented?
Originally
the income tax stage was due to be introduced in April 2018. The start date has
been deferred 5 times. The implementation has now been scheduled for April 2026
with a phasing in, dependent on income, over the following 3 years as follows:
Income |
Implementation
Date
|
>
£50,000 |
April
2026 |
£30,000
to £50,000 |
April
2027 |
<
£30,000 |
Dependent
on review of impact |
What is included
as income?
The
definition of income for the implementation dates has not yet been specified. The
probable definition is expected to be Gross Income / Turnover before the
deduction of expenses.
There
are some potential exemptions to having to file under MTD. You can apply for an
exemption on the grounds that it is not reasonably practical for you to file
under MTD due to age, disability, remote location etc. Any application must be
made to HMRC and they should accept or reject your application within 28 days.
Currently
MTD will not be applied to:
Ø
Non-resident
Companies
Ø
Trustees
Ø
Executors
and Administrators
Ø
Foreign
businesses of non-UK domiciled individuals
Ø
Limited
Liability Partnerships
What is the
difference between filing a self assessment online now and MTD?
Currently
if you file an individual income tax self assessment tax return you do so
either through logging into your personal Government Gateway or through third
party software. Your accountant should use their own software. You should NEVER
disclose your Government Gateway log in details to anyone including your
accountant. Foremans file our clients’
self assessment tax returns through HMRC accredited software.
MTD
means that you will have to file your income tax self assessment through HMRC
compliant software. HMRC will NOT provide software and you will not be able to
file your self employment through your Government Gateway.
What will need
to be filed?
Quarterly
Updates
There will be a requirement to file quarterly updates detailing income and expenses for the trading quarter.
End
of Period Statement (EOPS)
A
final annual return will then need to be filed. The final statement will be
referred to as the End of Period Statement (EOPS). The EOPS is expected to be similar to the
Self Employment and Property pages on the current Self Assessment tax return.
The EOPS should contain accounting adjustments, tax adjustments and will
finalise the tax position.
What are the
filing deadlines?
You
can either make your accounts under MTD up to 05 April each year or 31 March.
The full tax period should cover 12 months as follows:
Tax Months |
Calendar
Months
|
Filing
Deadline |
|
06 April
to 05 July
|
01 April
to 30 June |
05 August |
|
06 July
to 05 October
|
01 July
to 30 September |
05 November |
|
06
October to 05 January
|
01 October
to 31 December |
05 February |
|
06
January to 05 April
|
01
January to 31 March |
05 May |
|
HMRC are also currently running a test system referred to as “private beta testing” which taxpayers can join.
We
are aware that HMRC are writing to approximately 60,000 sole traders who are
registered for MTD VAT to invite them to join the HMRC test system.
Unfortunately HMRC will not be forwarding a copy of the letter to any tax
agents.
If
you do receive an invitation letter we would advise forwarding a copy to
ourselves so that we can review your eligibility and discuss if you wish to
join the testing program.
Please
do not hesitate to contact Foremans if you wish to discuss the above or any
other matter and our friendly Advisors will be pleased to assist you.

