What is MTD?
Making Tax Digital (MTD) is the governments initiative for digitalising and streamlining the tax return process. All returns are submitted to HMRC via compatible software making the process simpler, quicker and in real time.
MTD for Income Self-Assessment (ITSA) will be introduced in phased stages, starting in 2026. Initially due to start in 2023, however, following a government announcement at the end of 2022, landlords and the self-employed will now have longer to prepare.
- By April 2026 self-employed individuals and landlords with a yearly turnover of £50,000 and above will be required to comply with the new MTD ruling. This includes sending quarterly updates to HMRC via MTD compatible software, including an End of Period Statement (EOPS) and a Financial Declaration once a year.
- By April 2028 self-employed individuals and landlords with a turnover of £30,000 and above a year will be required to join the scheme.
- The government are currently reviewing whether smaller businesses with a turnover below £30,000 will join.
- There is currently no set date for when partnerships will be required to join the scheme, however, the latest statement confirms that the government remains committed to introducing MTD ITSA to partnerships at a future date.
Why the delay?
HMRC have said the main reason for the delay and new staggered join dates is to relieve the pressure on businesses caused by the current economic climate. They still believe there are huge benefits in digitalising tax, however they understand the transition may feel like a big change to some businesses. The scheme is part of the governments plan to fully digitalise the tax system and reduce the burden of tax returns for small businesses.
“In the current economic climate, preparation and planning are essential for small businesses to ensure they are successful. MTD will help with planning and in doing so stop any surprises arising. Whilst this might appear an onerous obligation by HMRC it really isn’t too tricky and something we as an accountancy firm can help with.”
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