The idea of MTD was initially announced by HMRC back in 2015, where key parts of the tax process are moved to a more efficient and streamlined digital process. The first tax to go digital was VAT, and in 2019 we enabled businesses to submit their VAT returns as part of MTD.
Initially, businesses with a taxable turnover above the VAT threshold of £85,000 were required to sign up for MTD for VAT. Businesses under the threshold are allowed to do so voluntarily.
However, as of April 2022, this will become a requirement for all VAT-registered businesses, meaning businesses will have to submit a VAT return using the HMRC MTD link while maintaining a digital link with the original data.
Following the introduction and rollout of MTD for VAT, HMRC aims to launch MTD for ITSA (Income Tax Self Assessment).
MTD for ITSA will come into effect as of April 2024 (subject to change) for unincorporated businesses and landlords with a total business or property income above £10,000 per year. This date, just like the initial MTD for VAT timescales, has been pushed back several times before, watch this space for updates.
Similar to the introduction of MTD for VAT, there will be a soft launch initially, with most businesses benefitting from a two year “prepare and test” service before it’s more widely introduced.
Those who use the scheme will be required to submit a quarterly summary of their business income and expenses using MTD compatible software, such as QuickFile.
As a result of sending this to HMRC, an estimated tax calculation will be sent in response, helping you improve your budgeting for any tax that will be due.
In addition to the quarterly summary, one final year-end submission has to be made, where you can also add any non-business information, including other income sources, such as:
- employment income
- bank or building society interest
- student loan repayments
- gift aid
- pension contributions
- and more
This process will replace the need for a Self Assessment tax return, so it’s all done in one place.
The deadlines won’t be changing. All that will change is a new quarterly submission will be required and that your end of year submission (“self assessment”) will be submitted through MTD compatible software.
The timing of the quarterly submissions is decided by the start date of the tax year, so you’ll have the following periods:
- 6th April to 5th July
- 6th July to 5th October
- 6th October to 5th January
- 6th January to 5th April
We’ve been gearing up for this for quite some time, right back to the initial launch of the MTD Periodic Reports in 2017.
We understand how important this scheme is for businesses who have to use the new setup. We’re working hard behind the scenes to bring you new tools and reports to help you stay on top of the quarterly summary and other aspects of Making Tax Digital.
We are more than happy to answer any questions you may have regarding our support for this scheme - just let us know below.