MTD for Income Tax

HMRC's MTD Plan

Making Tax Digital (MTD) is HMRC’s plan to become one of the most digitally-advanced tax administrations in the world. This means that big changes are needed to our current tax system, affecting both how data is collected and how it is stored by HMRC. MTD will apply to VAT, Income Tax and eventually Corporation Tax affecting the majority of businesses and therefore, agents over the next few years.

MTD for Income Tax is going to be introduced for businesses, including property businesses, with income over £10,000 from 1 April 2023.

What will MTD for Income Tax involve?

As with MTD for VAT one of the main requirements of MTD for Income Tax is the necessity to keep a digital record of income and expenses. This can still be via a spreadsheet as long as the data is imported digitally into the software used to send a summary of income and expenses to HMRC.

A summary of income and expenses must be sent to HMRC every three months. Using the information that has been sent, HMRC can then provide an estimate of the tax liability. A final report needs to be sent to HMRC, which confirms the income and expenses of the accounting year. At this point, a claim for allowances and reliefs can also be made and a final tax calculation obtained.

Although there is an obligation to send income and expense information every 3 months, it is possible to send an update to HMRC more often, for example, if a more up-to-date tax estimate is required.

What is TaxCalc doing to assist businesses and agents with MTD for Income Tax?

We are actively working on solutions as recognised by HMRC to make the transition into MTD for Income Tax as seamless as possible. Initially we will be providing a method to submit your periodic updates to HMRC and enhancing the range from there. We are also keen to develop transactional record keeping in time as a solution for the digital record keeping requirements to assist in the submission of quarterly updates to HMRC.

HMRC is currently in the BETA stages of development so we will be looking for users who’d like to be part of this process.

If you’d like to be involved in the BETA or you would like to be involved in how we will be shaping our MTD solutions, please get in touch with us at mtd@taxcalc.com