HMRC releases details MTD for Income Tax

HMRC has published more details on how Making Tax Digital for Income Tax (MTD for IT) will work for buy-to-let landlords and sole traders with qualifying income over £10,000.

For these landlords, MTD for Income Tax will replace the current process of completing an annual Self Assessment tax return. Landlords who earn a combined business and/or property income of between £1,000 and £10,000 a year will need to continue filing annual tax returns through the Self Assessment process.)

These changes will apply to businesses, self-employed individuals and landlords who are chargeable to Income Tax.

HMRC releases details MTD for Income Tax

The MTD for Income Tax rules will come into place from 6th April 2024. HMRC is asking for users to sign up for the test phase. The rules will require qualifiers to make quarterly submissions, and the new deadline for end of year statements will be 31 January after the end of each tax year.

HMRC will use data from self assessment tax returns to calculate qualifying income and will contact all affected taxpayers directly to inform them that they fall under the new MTD for IT rules.

Under these rules, HMRC will require you to use software to:

• keep digital records of your property and/or business income and expenses

• send quarterly updates of your property and/or business income and expenses to HMRC

• finalise your property and/or business income by submitting an end of period statement (EOPS) and final declaration to HMRC

Keep digital records using software

You must use compatible software to keep digital records of all your business income and expenses. You can authorise HMRC to exchange data with your agent (your accountant) for any Making Tax Digital service. Once authorised, your agent can:

• sign up your business

• use software to create and store digital records on your behalf

• use software to view, edit and send your data to us

If you’ve previously authorised an agent to act on your behalf, you will not need to re-authorise them for Making Tax Digital for Income Tax. Find out more by talking to Styles & Associates Accountancy on: 01420 541 554

HMRC states:

'Your qualifying income is the combined income that you get in a tax year from self-employment and property income sources. We assess this before you deduct expenses (that is, your gross income or turnover).

'All of your qualifying income must be reported through MTD compatible software.

'All other sources of income reported through self assessment, such as income from employment, dividends or savings, do not count towards your qualifying income. You will need to report income from these sources using either your MTD compatible software (if it has the functionality) or HMRC online services account.'

Source: Using MTD for IT

HMRC releases details MTD for Income Tax