MAKING TAX DIGITAL
For the past year we have been working towards the April 1 2022 deadline where all VAT-registered businesses will have to comply with Making Tax Digital with MTD for income tax has been now delayed until 6 April 2023. Here is a summary of what you need to know:
Where are we now?
As of 1 April 2019, all businesses over the VAT threshold (currently £85,000) have had to keep VAT records digitally and submit VAT returns to HMRC online using the HMRC software. Whilst the launch date for MTD for income tax has been delayed several times many people are still doing their annual self-assessment using the traditional tax return method .
When will changes happen?
As of 1 April 2022, all VAT-registered businesses must comply with MTD for VAT, regardless of their turnover. Any individuals with annual income above £10,000 (including revenue from businesses and property) will also need to follow the rules for MTD for income tax from their next accounting period starting on or after 6 April 2023.
HMRC will expand its MTD for income tax pilot service
From April 2021 the pilot scheme will be opened up to anyone to allow them to test the system and ensure they are prepared for final date of 6 April 2023.
The final piece of the jigsaw if corporation tax which the government is expected to hold consultations on this year.
The main changes will be:
- Businesses and landlords to send a quarterly summary of their income and expenses to HMRC using MTD-compatible software.
- Businesses will then receive an estimated tax calculation to help them budget for their tax payments.
- Estimates will be based on the information entered and won’t account for
- tax-relievable payments such as gift aid or pension contributions
- tax due on other income (for example investment income and capital gains).
This system replaces the need for a self-assessment tax return.
HMRC’s guidance on MTD for VAT can be found here
These changes will impact us all and can be confusing, but we are here to help you get set up and ensure you get the benefits form the new system. For more information contact us.