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.



 

 

 

 

 

Foremans LLP Umberlla
Foremans LLP