Making Tax Digital for Income Tax is a new way of reporting earnings to HMRC. You will use software to keep digital records and send Income Tax updates instead of filing a Self-Assessment tax return.
Making Tax Digital (MTD) means you will no longer be able to keep and submit manual records and returns. The rules will be the same for
VAT-registered businesses. You will need to keep and submit their records using software that supports Making Tax Digital, such as
Xero.
It may be a good idea to update your systems in advance because the use of the software will be mandatory.
There is good news for your business here, as using accounting software will make your systems more efficient. You may find it’s saving you time, and you have a clearer idea about your finances.
Keeping up to date with your bookkeeping will enable you to make informed decisions for your business and save up for tax every month. Gone will be the days of stressful times before Christmas and saving up for your tax liability at the last moment.
Self-employed and Landlords
Self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for Making Tax Digital for Income Tax from 6 April 2024.
General partnerships
General partnerships that earn over £10,000 a year must sign up for Making Tax Digital for Income Tax by 6 April 2025. These partnerships only have individuals as partners and all partners are jointly liable without limits for partnership debt.
What will you have to do?
• You will need to keep digital records of all your business income and expenses
• Send quarterly updates to HMRC.
• Submit an end-of-period statement when you finalise your business income and expenses for the tax year.
• Submit your final declaration and pay the tax you owe by 31 January of the following year.
• You will still need to send HMRC a
Self-Assessment tax return
for the tax year before you signed up for Making Tax Digital for Income Tax.
