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Making Tax Digital for Income Tax (MTD)

Making Tax Digital for Income Tax (MTD)

HMRC have proposed that MTD for income tax will be introduced from 6th April 2023 for taxpayers who have gross business or property income over £10,000. The rules will also apply to partnerships and trust with business or property income.

Individuals will now be required to keep records electronically (either using a spreadsheet or suitable software) and file quarterly returns with HMRC providing details of their income and expenditure.

Although the frequency of reporting is to change, the timing of tax payments (payments on account and balancing payment due on 31st January) is expected to remain in place.

Assuming you choose an accounting period that is in line with the tax year (this will be the most likely scenario) your quarterly returns will fall due:

  • First Quarter: June/July 2023
  • Second Quarter: September/October 2023
  • Third Quarter: December 2023/January 2024
  • Fourth Quarter: March/April 2024
  • You will then have a final year-end report to complete where you will also be able to claim any allowances or relief. This will be due on 31st January 2025.

The quarterly updates will only include a summary of your property/business income. HMRC plan to auto-populate other income sources such as employment income or bank interest as part of the final submission process in the future.

There will be no late filing penalties for at least a year while the new system is brought in. You can also choose to make voluntary payments as you go along which may help to spread the cost however HMRC are yet to confirm further details.

Exemptions from MTD

Individuals will not be required to follow the MTD Income Tax rules if any of the following apply:

  1. It is not practically possible to submit electronically due to age, disability, remoteness of location or any other feasible reason
  2. If your religion does not allow you to use electronic software/computers
  3. Individuals are subject to an insolvency procedure

If you require any further information. Please get in touch with your usual Ward Williams contact.