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Making Tax Digital for Income Tax Self-Assessment

June 16, 2023

Making Tax Digital for Income Tax Self-Assessment is a phased implementation announced by HM Revenue & Customs, which is starting in April 2026 with the second stage commencing in April 2027. This means that if you are self-employed, a landlord, or both, and your combined turnover from all trading and rental income is above certain thresholds, you will need to keep digital records and provide quarterly updates on your income and expenditure to HMRC. 

For instance, if you have a turnover (before expenses) of £31,000 from self-employment and rental income of £19,200 per year from two rental properties, your combined income of £50,200 will require you to keep digital records and submit quarterly updates. From April 2027, individuals with a combined income of between £30,000 and £50,000 will also need to comply. 

So, what are Digital Records? 

Digital records refer to records that are kept on a spreadsheet, software solution, or a combination of both.  

How do you submit Quarterly Updates? 

To submit the quarterly updates, you will need to use MTD-compatible software, which is widely available from most software providers. Alternatively, you can provide digital records to your agent for submission. 

The quarterly updates should be submitted by the filing deadline, which is one month after each quarter end. The quarters run to 5 July, 5 October, 5 January, and 5 April. However, you can also choose to use the previous month-end dates of 30 June, 30 September, 31 December, and 31 March. 

What is a MTD Compatible Software? 

Most software providers are now providing MTD Compatible Software, but as the agent can submit the updates on behalf of the individual, the individual only needs to have digital records in a format which can be transferred to the agent’s software. 

But, what about Self-Assessment? 

If you are required to submit quarterly updates, you will no longer need to file a Self-Assessment return. Instead, you will submit an End of Period statement covering the trading and rental income, followed by a Final Declaration of all other income. Both statements will have a similar filing deadline to Self-Assessment of 31 January following the tax year. Tax payment dates will remain the same as the current 31 January and 31 July payment dates. 

In summary, Making Tax Digital for Income Tax Self-Assessment is a phased implementation of digital record-keeping and quarterly updates for individuals who are self-employed, landlords, or both. It is important to ensure that you keep digital records that can be used by MTD-compatible software, whether you submit the updates yourself or through an agent.

Get in touch with our Tax department to find out how we can help at info@hentons.com.

Gary Olding

Gary is the National Head of Tax and oversees our Tax Compliance and Medical Tax Teams. When not dealing with clients he is supervising operations, troubleshooting, and optimising workflows.

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