What the next phase of MTD means for our clients?
The biggest question, for now, is what does the extension of Making Tax Digital to cover income tax from April 2023 actually mean for UK taxpayers? Right now, we only have draft regulations to go on, so there are a few areas of the scheme that could be subject to change. The official word from HMRC is that from the next accounting period following 6 April 2023, all income tax self-assessment customers with a turnover of £10,000 or more from business or property income will be required to complete their affairs by MTD. That £10,000 mark is a combined total, so if you have a client with a business turnover of £8,000 and property turnover of £3,000, for example, they’ll be included in the scheme.
Anyone included in MTD for ITSA will be required to:
- keep digital records of all their business or property income and expenses
- send four quarterly updates of their income and expenses to HMRC
- submit a final declaration of their business income at the end of the year.
Choosing compatible software
To comply with MTD, our clients must use “functional compatible software” to keep their records and submit updates. The software must be able to keep digital records, and provide HMRC with information and returns from that data, using an application programming interface (API) platform. It must also be able to receive information from HMRC using the API. Under this system, HMRC will not accept any manual data entry or copying and pasting between software. This means spreadsheets can only be used for recordkeeping if they’re connected to HMRC systems using bridging software or an inbuilt function that connects to the API. But rather than muddling through with a makeshift solution to the new rules, we always recommend our clients getting a fully MTD-compliant package from us, otherwise that would be more expensive and time consuming for them.
Annual final declaration
We will need to finalise our client’s income and expenses at the end of your accounting period, as well as submitting any other personal income they have or reliefs they claim. This final declaration will effectively replace the usual self-assessment tax return, so for most people it will be due by the current deadline of 31 January after the end of the tax year.
What the next phase of MTD means for our clients?
The biggest question, for now, is what does the extension of Making Tax Digital to cover income tax from April 2023 actually mean for UK taxpayers? Right now, we only have draft regulations to go on, so there are a few areas of the scheme that could be subject to change. The official word from HMRC is that from the next accounting period following 6 April 2023, all income tax self-assessment customers with a turnover of £10,000 or more from business or property income will be required to complete their affairs by MTD. That £10,000 mark is a combined total, so if you have a client with a business turnover of £8,000 and property turnover of £3,000, for example, they’ll be included in the scheme.
Anyone included in MTD for ITSA will be required to:
- keep digital records of all their business or property income and expenses
- send four quarterly updates of their income and expenses to HMRC
- submit a final declaration of their business income at the end of the year.
Choosing compatible software
To comply with MTD, our clients must use “functional compatible software” to keep their records and submit updates. The software must be able to keep digital records, and provide HMRC with information and returns from that data, using an application programming interface (API) platform. It must also be able to receive information from HMRC using the API. Under this system, HMRC will not accept any manual data entry or copying and pasting between software. This means spreadsheets can only be used for recordkeeping if they’re connected to HMRC systems using bridging software or an inbuilt function that connects to the API. But rather than muddling through with a makeshift solution to the new rules, we always recommend our clients getting a fully MTD-compliant package from us, otherwise that would be more expensive and time consuming for them.
Annual final declaration
We will need to finalise our client’s income and expenses at the end of your accounting period, as well as submitting any other personal income they have or reliefs they claim. This final declaration will effectively replace the usual self-assessment tax return, so for most people it will be due by the current deadline of 31 January after the end of the tax year.