Making Tax Digital (MTD) has been a fact of life for VAT-registered businesses for some time now, but HM Revenue & Customs (HMRC) has now confirmed that self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for MTD for income tax from their next accounting period starting on or after 6 April 2023.
If affected, you will need to keep digital business records and get compatible software, which you will use to send in quarterly business income and expenses updates. You’ll then finalise your business income after the end of your accounting period and submit a final declaration after the end of the tax year, instead of your usual self-assessment tax return.
You can already volunteer to follow the MTD rules in certain, quite restricted circumstances. We recommend that you speak to us before signing up to the programme.
In the meantime, HMRC will be using the next three years to
develop their systems, hopefully run full pilot schemes and provide support to
affected businesses and landlords. If they follow the same approach as with
VAT, there may be a ‘soft landing’ but, ultimately, interest and penalties will
be charged for those who do not comply with the new rules.
We’ll keep clients abreast of developments.